Felix Salmon

What’s this about me getting some kind of online video programming before the end of the year?

Well, it’s all still a little vague and it’s very much a work in progress. But right now the idea is that I do a little rant into a video camera, and then the Reuters production wizards add some very cute bells and whistles and edit it down into something snappy and fun. Here’s a proof of concept, let me know what you think!

Wall Street Doesn’t Get It datapoint of the day — NYO

Quantitative analysis of the difference between straights and gays — OKCupid

Improvisation, not plotting, behind Ecuador’s “coup” — Qorreo

Are hedge funds front-running their own 13F disclosures? Probably not, but they could if they wanted to — All About Alpha

Everything you ever wanted to know about MERS — SSRN

Chrystia Freeland interviewed Laura Tyson and Glenn Hubbard here at Reuters this morning, and the whole thing was surprisingly friendly: the Davos-centric elite talking constructively about what ought to be done, and spending a lot of time agreeing with each other.

The whole interview took the classic form of a journalist asking experts what their opinion is about what should be done: here’s where the two sides agree, and here’s where they disagree. But from my point of view, all three of the people on camera are very much on one side of the much bigger, much more heated, and much more important debate — call it the technocrats versus the populists.

Laura Tyson, for instance, early on talked with an upturned nose about “the political atmosphere in the United States”. These people running for Congress, they oppose TARP, which we members of the elite all agreed was absolutely necessary. There’s “a poisonous atmosphere in terms of how one looks at the financial services industry or the business sector in general”. And she even uses the third person plural:

The population is furious with the leaders of government and the leaders of the business community, both the real business community, quote-unquote, and the financial markets, for getting us into this mess.  That’s how they see it.

Of course, that’s not how we see it. We don’t feel the need to make the distinction between the financial markets and the real business community. And the Obama administration — they’re good guys! They’re reaching out to the business community!

While Tyson looked out of touch, Hubbard was doing his best reasonable-Republican impression, agreeing frequently with what Tyson was saying while still pushing hard for the Bush tax cuts on the rich to be extended. Not to do so, he said, would constitute punishment of the rich, and we don’t want that. When Chrystia pushed him on that point, his mask slipped a bit:

But the bit we were all waiting for was for Chrystia to ask Tyson and Hubbard about Inside Job, the film where they both come off very badly. The film’s director, Charles Ferguson, contributed a pointed blog entry to Reuters about the two of them, saying that they “exemplify the disturbing, opaque conflicts of interest that pervade the economics discipline”. Certainly it’s odd that the two economists, whose entire profession is based upon the premise that incentives matter, should be so resistant to the idea that the millions of dollars they’ve earned from the financial-services industry might in any way color their actions or beliefs.

Chrystia put the question in the gentlest possible way, talking about

the idea that one of the things that created the financial crisis was that experts, policymakers, people like you, became too close to business, not because you’re bad, but because those are the people you hang out with, those are the people on whose boards you serve. And you started to see the interests of the collective — of the state, of the country — and the interests of business as being the same.

Ferguson’s thesis is much harsher, of course: he doesn’t just blame people like Tyson and Hubbard for the financial crisis; he blames these two individuals personally. (Among others.) And yes, he thinks that all that money has corrupted them, made them bad. Ferguson knew how Tyson would respond: “she has confined her remarks on the financial crisis to extremely vague statements about ‘greed,’ ‘human nature,’ etc.” he writes, and that’s exactly what she did, taking advantage of the way that Chrystia phrased the question to answer a theoretical question rather than a personal one.

But Hubbard’s response is more interesting:

I know in my own case, as somebody who’s advocated more regulation and a wholesale mortgage refinancing, I’m kind of a strange bedfellow with the financial services industry, if that’s Mr. Ferguson’s accusation.

Of course this is silly: insofar as Hubbard has advocated more regulation, he’s advocated exactly the kind of more regulation that the financial services industry would be perfectly happy with. And the financial services industry in general would love lots more mortgage refinancing, or any other kind of consumption of its services. Indeed, Pimco’s Bill Gross has been pushing that very idea quite loudly.

After watching the whole thing, I can’t imagine that it did Tyson any favors if she’s angling to replace Larry Summers at the NEC. She was good at talking about “the President’s policies” a lot, but she doesn’t represent the kind of change that the public is clamoring for — she’s happiest talking about economic theory in the abstract, and she’s much less good at relating it to the real lives of real Americans living on mere five-figure salaries. And, of course, there’s no indication at all that the public wants a board member of Morgan Stanley ($350,000 a year for turning up to a few board meetings) to replace Summers in the White House. We’ve had enough of bankers running the country, especially when they’re as out of touch as this, and when they refuse to answer hard questions from the likes of Charles Ferguson.

Google’s driverless car is one of those technologies which makes me feel old, in a bad way: I would dearly love to have been able to grow up with this technology. And I can’t wait for it to arrive: I’m not a very good driver, and I’m sure that taking a Google car would be much safer for both me and for other road users.

It could also cause a radical change in the economics of cars, making it much less attractive to buy them, and much more attractive to buy into something much closer to the NetJets model. Doron Levin has a keen insight:

Cars that don’t need drivers also may not need private owners – since they could be summoned remotely and returned once their journey is complete. Why take on a lease if you can purchase a subscription to a car instead? Car owners who never want to spend a saturday under the hood or in the waiting room of a mechanic’s shop again might quickly adapt to a car subscription model.

My guess is that in the first instance, at least, driverless cars are still going to require a driver sitting behind the wheel, much as airplanes on autopilot still require a pilot at the controls. So sending a driverless car back to its depot at night will be non-trivial. But eventually we’ll get there, and you’ll be able to rent a truck when you need a truck, or a zippy sportscar when you’re so inclined, or a big family wagon only when you need it.

One of the big problems with cars right now is that families buy the biggest car they’re ever likely to need. The family car might just be used to drive a single person to work and back most of the time, but because it might used for a family camping holiday once every year or two, the family ends up buying something huge, and the expense of that work commute rises substantially as a result.

Similarly, one of the big reasons why people are wary of electric cars is that every so often they want to take long car journeys which can’t be managed on a single charge. Up until now, the only solution to that problem is either to have a second, gasoline-based, car, or else to have a nationwide network of recharging stations which in any case are likely to take far too long to recharge the battery.

Car subscriptions would be a much better solution. You use an electric car most of the time, and then when you need something with greater range, you just swap it out for one of those instead.

So bring on the self-driving car! It could be exactly what we need to get most of us driving electric.

It’s the Value Investing Congress today and tomorrow, I’m not sure whether I’m going to be able to make it at all, but you can be sure that lots of financial journalists will be filing breathless reports about various celebrity hedge fund managers’ investment ideas, and that the actual delegates at the conference will be even more excited about the prospect of getting to be in the same room as these multimillionaire investment stars.

It’s a highly artificial environment, where fund managers get to present their best case for why a given stock is undervalued. And if there’s one lesson to learn from going to this event, it’s that successful fund managers are also highly-accomplished salesmen. They’re fantastic at telling stories, and by the time their presentation is over, you’re all but phoning up your broker on the spot, telling him to buy as much as he possibly can.

It’s an amazing place for hedge fund managers to find and impress potential new investors in their funds: it’s that rare opportunity, for them, to speak to a large audience which has money to burn (tickets are $4,395 apiece) and which clearly is predisposed to like their ideas — all in a distraction-free environment where nobody is going to challenge their analysis with a bear case or otherwise interfere with the message being sent.

If you’re attending the Congress, then, I’d urge that you be highly conscious of your own human biases. You’ve spent all that money — now you want to get value from it, right? You’re actively looking for stocks to invest in, and managers to invest with. Which means that the bar has to be set very, very high. Indeed, I’d argue that the bar should be set infinitely high — that the best thing to do is simply sit back, take note of the stocks that everybody is talking about, and then rank them. Make a list with the ideas and managers you found most compelling at the top, and the ones you found least compelling at the bottom. Then, do nothing for one year, or whatever time horizon you think is sensible to judge the managers on. If three years is better, then use that.

At the end of that period of time, look to see if there’s any correlation at all between the ideas you found most compelling, on the one hand, and the trades and managers which ended up making the most money, on the other.

What you’re doing here is not judging fund managers — rather, you’re judging your own ability to judge fund managers. After all, there’s no point in taking someone else’s investment advice if you exhibit demonstrably poor judgment in working out whose advice to take.

Ideally, you should repeat this exercise a few different times — maybe at successive Value Investing Congresses, maybe at other such events. Eventually, you’ll get a pretty good idea of your own ability to discern someone else’s ability to generate alpha. Or, to put it another way, you’ll work out whether you’re capable of distinguishing genuinely good stock-picking ideas from genuinely good salesmanship. I’m pretty sure that I can’t do it, and as a result, no matter how rich I was, it would be a waste of money for me to spend $4,395 attending this event. If you think you’re better than me on that front, then feel free to attend: I wish you all the best of fortune. But it’s almost certainly a good idea to test that hypothesis first.

The NYT’s Dealbook franchise spent a chunk of yesterday in internal discussions on how to use Twitter, which is hopeful. But first they should work on their ability to use the Web.

A nice little scoop fell into Dealbook’s lap yesterday, when Ray Lane, the incoming chairman of Hewlett-Packard, wrote a strongly-worded letter to the NYT in response to Joe Nocera’s column on Saturday. In it, Lane linked to a blog entry by Josh Greenbaum which also took issue with Nocera’s column.

Dealbook, however, didn’t publish the letter, which was clearly intended for publication; nor did it link to the letter elsewhere; nor did it link to Greenbaum’s post. Instead, in an unsigned post, it merely quoted two paragraphs from the letter.

And so it was left to Dealbook’s biggest rival, the WSJ — in the form of its All Things Digital franchise — to publish the letter. AllThingsD’s Kara Swisher obtained a copy of the email, posted it, and ended up outscooping the very publication to whom the letter was addressed.

All of which says to me that Dealbook still has a newspaper mindset, rather than a blog mindset; I guess the editors there felt that their job was to report on the letter, rather than simply publish it. (The FT clearly felt the same way: it reported on the letter, but neither published it nor linked to it.) It’s a bad habit left over from print days, and it shouldn’t happen on any newspaper website, let alone a blog.

Of course, if the letter is newsworthy, then it’s worth writing about. But if you have the letter, and if you’re writing about the letter, then there’s no excuse at all not to print the letter.

It’s worth noting, here, that AllThingsD is deliberately and consciously operated at arm’s length from the WSJ, with its own reporters, its own publishing technology, and its own offices in California. It’s a model the FT has aped with its new FTTilt operation, for good reason. As anybody who has ever worked at a blog inside a print newsroom will tell you, there are constant conflicts and internal fights when that happens, with the bloggers wanting to publish lots of stuff and the newspaper people holding them back for all manner of reasons.

I don’t know whether Dealbook wanted to print the letter and wasn’t allowed to, or whether it simply self-censored. But if it’s serious about becoming “the Politico of finance”, then it’s going to have to be much more aggressive on mini-scoops like this one. Win the lunch hour, people!

John Carney has the best explainer yet on the foreclosure crisis — CNBC

Cigar Guy Unveiled — Time

The best response yet to Andrew Sullivan’s 10th blogiversary — Atlantic

Steve Rattner on Sheila Bair — Economics of Contempt

Justin Bieber launches nail polish line. On National Coming Out Day — Reuters

Joan Sutherland, 1926-2010 — SMH

I can’t help but think that UBS’s widely-publicized tax issues are hurting its U.S. brokerage:

UBS AG executives are trying to squeeze more production out of several hundred brokers in the U.S. who received bonuses to join the company but haven’t brought in enough clients or other revenue to become profitable for the Swiss bank. UBS has about 6,700 brokers in the U.S.

Senior managers in the division such as its chief executive, Robert McCann, have been pushing some new brokers for about six months to “win back” their old clients.

Broker-poaching is commonplace in the brokerage industry and is universally predictated on the idea that clients are much more loyal to their broker than they are to their broker’s firm. So if a broker moves from Morgan Stanley, say, to UBS, then that broker’s clients are expected to move with her.

Except, this doesn’t seem to be happening at UBS, which lured away brokers with the promise of large bonuses and then saw those brokers’ former clients stay put, refusing to follow their broker to the now-notorious Swiss bank.

This could also be related to the move from active to passive investing. Stockbrokers are by their nature active investors, picking stocks and looking after your investments. Maybe the departure of your broker from one shop to another is as good a time as any to ask whether you need a broker at all or whether you should just put all your money in ETFs. Especially if your broker turned out to give bad advice during the crisis, buying just before the market crashed and selling near the bottom.

The human touch is valuable, of course, but it’s not worth nearly as much as most brokers earn or as most of their clients end up paying. Hire an independent financial adviser, if you must, to help you out with asset-allocation decisions and to hold your hand in times of market turmoil. But just like picking stocks or picking fund managers or even picking a stockbroker, picking a good financial adviser is hard. Go for one with a minimalist approach: in general, less is more. If they tell you they’re smarter than everybody else, run away.

Back in January, the WSJ’s Stephen Grocer ran an startling article about Wall Street’s 2009 bonuses:

An analysis by The Wall Street Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008—and slightly more than in the record year of 2007.

On further examination, however, the assertion that Wall Street bonuses were going to hit a record high turned out to have a serious flaw: the calculations for that “record year of 2007″ excluded the likes of Bear Stearns, Merrill Lynch, and Lehman Brothers.

At least in January a critical reader could pick up on that flaw, by reading this paragraph in the right way:

The increase in both revenue and compensation is due partly to the industry’s consolidation during the financial crisis. J.P. Morgan, for example, acquired Washington Mutual Inc. and Bear Stearns Cos. Bank of America bought Merrill Lynch & Co. and Countrywide Financial Corp. Those deals inflated revenue and compensation because the acquirers’ financial results now include the purchased companies.

Obviously, those acquisition deals wouldn’t have inflated total Wall Street compensation if the likes of WaMu, Merrill, and Countrywide were included in total Wall Street compensation figures all along.

Today, however, the WSJ runs much the same article, but with no such giveaway that the data is flawed.

Pay on Wall Street is on pace to break a record high for a second consecutive year, according to a study conducted by The Wall Street Journal.

It’s simply intellectually dishonest to say that a 2010 payroll of $144 billion would constitute an all-time record if you aren’t comparing that sum to total Wall Street pay in 2007.

But it gets worse: at least the January article was largely based on public securities filings. Today’s article, by contrast, is simply based on a survey, which the Journal isn’t publishing and whose methodology we’re not privy to. It’s not even entirely clear whether the Journal survey of 35 firms is the same as the eFinancialCareers survey of 5,671 bankers and financial professionals cited in a sidebar chart.

So please, WSJ, when you’re writing articles about the highly-sensitive subject of Wall Street bonuses, be as transparent and accurate as you can. Explain where you’re getting your numbers, explain exactly how you’re calculating them, and explain any weaknesses in the methodology. You can still have your sensationalist headlines, but if readers want all the relevant information, there’s no reason you shouldn’t give it to them.

Remember the FSA’s hilarious attempt to stop M&A leaks coming out of investment banks? Well, the UK press certainly does. The editors of the FT, Times, and Guardian, as well as Reuters’s very own David Schlesinger, have written a “we, the undersigned” letter to the FSA expressing “profound concerns” with its recommendations and asking the agency “to reconsider and revoke” them:

Regulated firms will find it much easier to hide behind bland press releases that conceal inconvenient corporate realities and there is a heightened risk that journalists will feel compelled to publish unconfirmed reports and rumours, increasing the flow of misinformation.

Journalists and the media play a key role in maintaining a level playing field in the market by unearthing and disseminating information – including information that companies seek to hide, obscure or spin. By adopting an overly prescriptive approach to preventing leaks, the recommendations would greatly restrict the capacity of the media to carry out investigations of regulated firms such as banks, asset managers and brokers…

It is also far from clear that the recommendations will even achieve their stated objective. Individuals who want to leak information will always be able to find a means of doing so and the plan fails to adequately address strategic leaks.

There’s no indication that the letter will have any more effect than the original newsletter. Indeed, when confronted with this level of rhetorical firepower from the very heights of the UK journalistic establishment, the FSA blithely dismissed it through a spokeswoman:

An FSA spokeswoman reiterated that its newsletter was in response to concern from companies and investors, and said obligations to keep inside information confidential had not changed.

“We have simply reminded firms of their existing obligations and provided best practice views around systems and controls,” the spokeswoman said.

To risk stating the blindingly obvious: all this high-level philosophizing on how companies should or shouldn’t work with journalists is not going to make any significant difference either way. If companies want to blandly obfuscate, they will do so regardless of what the FSA thinks, and if they want to leak, they will leak.

By far the silliest part of the FSA’s “best practice views around systems and controls” was the way in which they seemed to envisage a world where aggressive journalists would constantly call up investment bankers in the middle of the weekend, asking “I say, old chap, is there some M&A deal you’re working on?”, and the investment bankers would say “you know, funny you should mention that, it just so happens that LVMH is putting together a hostile bid for McDonald’s at $117 per share, payable in Swarovski crystals and vintage Champagne”.

In the real world, as the letter quite rightly points out, leaks happen for a reason, and the first contact is very likely to be in the other direction: the banker will send a text message to the reporter, say, or a trusted intermediary will ensure the information is passed along at a tactically-optimal point in negotiations.

It’s true that for less sensitive stories, reporters tend to hate being babysat by PR people, and the interviewees often don’t much appreciate it either. But that’s not the kind of issue worthy of what Reuters describes as “a rare joint letter” from otherwise highly competitive editors — one, no less, in which they all but come out and threaten “to publish unconfirmed reports and rumours” if the FSA’s recommendations are enacted.

Is there a subtext here I’m missing? My feeling is that all of this is a skirmish in a much larger war over the freedom of the press — a war in which government authorities and big corporations want reporters corralled and controlled, while newspaper editors and the reporters themselves want untrammeled freedom. That’s an important principle to fight for, and so the UK press is responding aggressively to any real or perceived incursion on their freedoms, no matter how silly it can seem to outside observers. In any case, if you want to read the letter yourself, I’ve embedded it here.

Letter for Hector Sants, FSA

Charlie Gasparino takes a swing at Nouriel Roubini today; I’m not sure why, beyond general unhappiness at the fact that Nouriel still gets a lot of respect both inside and outside Washington.

Gasparino apparently conducted an “informal survey”, in which, he says, he couldn’t find a single investor who regularly uses Roubini’s research. He tells us nothing about the participants in this survey — who they are, how many of them there are — and neither does he tell us what he would consider “regular use”. (Note what he doesn’t say: that his survey turned up no subscribers to Roubini’s research.)

It’s not entirely clear what the point of this “informal survey” was, since all he needed to do was phone up Nouriel’s spokesman, who was happy to tell him that Roubini has over 1,000 institutional clients. Maybe it was just an excuse to start bashing Nouriel’s research output:

Roubini’s record shows that while he was predicting doom and gloom for the US in 2004, his initial call had nothing to do with a runaway housing bubble…

It wasn’t until about August 2006 that Roubini began talking about a housing crisis, and he was hardly alone. Several economists and investors, from John Paulson to Stan Druckenmiller and around this time Goldman Sachs, were also predicting the housing decline…

Last year he predicted that the rising price of gold was in fact a bubble, just like the housing one a few years earlier, and like housing, it would burst as well. But as we all know gold prices remain strong.

Someday, Roubini might be right about gold’s demise, but what good does that do me as an investor now?

This doesn’t even make internal sense. Gasparino implies that Nouriel’s bearish prediction in 2004 would have had value if he had tied it to the housing bubble, even though the housing bubble didn’t burst for a good three years after that. But then he slams Nouriel for talking about the gold bubble last year, on the grounds that identifying a bubble more than a year in advance doesn’t do him good “as an investor now”.

If Gasparino spent time on the phone with Nouriel’s spokesman, he surely knows that there’s a great deal more to Nouriel’s research product than Nouriel’s own predictions. Those are highly publicized in any case: you don’t need to pay Roubini.com thousands of dollars to find out what Nouriel thinks about, say, Greece. Instead, his product gives you access to a large team of smart economists, who do a lot of very useful aggregation, analysis, and strategy. And if you pay enough, you also get access to Nouriel himself, which means he’ll answer your questions and have interesting and provocative conversations with you, which in turn will be informed by all the other interesting and provocative conversations that he’s constantly having with clients, policymakers, and other smart and important people.

Does Gasparino really believe that the reason to subscribe to Nouriel’s research product is so that you can find out where Nouriel thinks that asset classes are moving, place bets in those directions, and then make money when he turns out to be right? I can’t imagine that he does, but clearly he’s happy to pretend to believe that if doing so will give him anti-Roubini ammunition.

The truth is, of course, that Gasparino’s only real beef with Roubini is that he’s a successful liberal. But the secret of Nouriel’s success is only partially a function of his early and loud insistence that the collapsing housing bubble would prove catastrophic. If Gasparino considers himself a student of how to successfully navigate Wall Street, he should take a much more serious look at Roubini.

(Full disclosure: I was fired from Roubini’s shop in early 2007, but he did give me enough exposure as an econoblogger that I was soon hired by Portfolio.com.)

Update: Watch Gasparino stammeringly recapitulate his argument on air, adding for good measure that “the only person that has disagreed with my analysis so far is Felix Salmon of Reuters, who — besides that he has a screw loose — is maybe the worst reporter in the world”. He says all this while bashing Roubini and while sitting right next to Mike Norman of John Thomas Financial. About which you might want to learn more here or here.

Sifma CEO Tim Ryan released this statement today:

“It would be catastrophic to impose a system wide moratorium on all foreclosures and such actions could do damage to the housing market and the economy. It must be recognized that the mortgage market, investors and the health of the economy are all inter-related. Investors in the housing market—including American workers with pension funds, 401k plans, and mutual funds—would unjustly suffer losses in their savings from these actions. Increased uncertainty in the securitization market would further constrain consumer credit and spending, dampening our already unhealthy economic situation. If mistakes have been made in relation to foreclosure processing, SIFMA firmly believes such mistakes should be corrected. It is imperative, however, that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy.”

It’s worth going through this slowly to see just how bizarre it is.

Firstly, it’s Sifma’s own members — with Bank of America taking the lead — who are imposing “a system wide moratorium on all foreclosures”. No one’s suggesting that the government could or should do such a thing: a foreclosure is, after all, a legal action brought by one private entity against another. It makes sense, if you’re going to sue somebody, that you make sure in advance that you have the your legal ducks in a row. Right now it’s abundantly clear that most loan servicers don’t have their legal ducks in a row, so it makes sense for them to stop foreclosing on homeowners, at least for the time being. (In Bank of America’s case, it has even tried to foreclose on houses which don’t have a mortgage at all.)

Secondly, it’s not foreclosure moratoriums which damage the housing market, it’s badly-documented mortgages. A healthy market is one in which title and ownership are clear and legally watertight; in which assets change hands at market-clearing prices; and in which value and market price are generally understood to be one and the same thing. Using these criteria, it’s pretty obvious that the housing market is not healthy now, and that the longer this foreclosure crisis drags on, the less healthy it’s going to be.

Crucially, you can’t judge the health of the market by house prices alone, especially when home sales are plunging and foreclosure sales often take place a good 35% below market values. And what goes for the housing market also goes, mutatis mutandis, for the mortgage market. It’s entirely possible that secondary-market RMBS prices will fall if housing prices drop. But in the medium to long term, what’s really necessary is for investors in mortgage-backed securities to have faith that they really own what they think they own. And the only way to do that is to bite the bullet and fix the mortgage mess.

In any case, it’s far from clear that a foreclosure moratorium would hurt house prices — or even RMBS prices — at all; indeed, it’s pretty hard to see exactly what Ryan and Sifma are worried about. They say that they firmly believe that the mistakes made in relation to foreclosure processing should be corrected, but they don’t bother to tell us how that’s meant to happen.

It would be great if Sifma were to take the lead on this issue, and come up with constructive solutions to a serious problem. Instead, they’re just delivering an inchoate and unhelpful blast of opposition. Sad.

Ben McGrath’s long-awaited New Yorker profile of Nick Denton is out, and it has (unsourced) numbers:

Given the thin margins of online publishing, Denton’s cultural impact greatly exceeds his revenues, which are somewhere on the order of fifteen to twenty million dollars a year. His ownership stake in the company is around sixty to seventy per cent, and every so often he attempts to consolidate by buying back shares that he has given to current and former employees. The rate he offered earlier this year would have put the company’s value at only thirty million dollars, or a fraction of what most analysts have estimated. (“Owning Gawker stock is like having an undiversified portfolio,” one shareholder said, explaining the potential appeal of such a lowball offer.)

All of these numbers are lower than I would have expected. The Gawker Media Network gets 447 million pageviews per month, of which 320 million are in the U.S. Even if you assume that Denton has no ability to sell ads outside the U.S., then that means Denton is bringing in about $5 per thousand pageviews, on average, with two ads per page. And these aren’t boring old banner ads, either: Gawker Media has long done innovative things with site sponsorships, like the Intel buy at Gizmodo today.

That number, in turn, helps to put another part of the story in some perspective:

At the outset, he had assumed that, in order to be viable, each individual site would need to achieve a million monthly page views; that threshold, he believes, is now twenty million.

At $5 per thousand pageviews, a site getting 20 million pageviews per month would have revenue of $100,000 a month, or $1.2 million per year. What we’re seeing here is Denton’s evolution towards moguldom: at the outset, he would have been utterly delighted with a blog making seven-figure annual revenues. Today, by contrast, that’s the absolute minimum he’ll accept.

Part of the reason is that payrolls per blog have been expanding substantially: where Gawker started with a single staffer making $2,000 a month, Denton’s blogs now tend to have a good dozen or more people on their editorial masthead. McGrath doesn’t give any numbers for Gawker’s payroll, but it’s surely very high at this point.

Which maybe explains why Denton’s stake in Gawker Media is lower than I would have expected — if you have that many staffers, even giving them a tiny bit of equity tends to add up over time. That said, it’s worth remembering that founding editor Pete Rojas left Gizmodo to start Engadget precisely because Denton would not give him any equity in the company.

It’s worth pondering who owns the 30 percent-40 percent of Gawker Media that Denton doesn’t own. The bulk of it, I suspect, belongs to the three colleagues named on the Gawker Media masthead: sales director Chris Batty, ad-sales chief Gabriela Giacoman, and general in-charge-of-everything person Gaby Darbyshire. Beyond that, CTO Tom Plunkett surely has equity, as does Scott Kidder. I’m sure that Curbed’s Lockhart Steele is sitting on some as well, dating back to his tenure as editorial director in the days when Gawker Media’s monthly pageviews totaled less than 2 million, and then there’s Steele’s predecessor, Choire Sicha, as well, and possibly some of their successors in that stressful position.

In any case, I’m sure that Gawker Media is very closely held, which means that at least some of Gawker’s shareholders must own between 5 percent and 10 percent of the company. Even at Denton’s lowball $30 million valuation, his company is now big enough that it has created millionaire employees. (One thing missing from the McGrath profile is the way in which Denton was very good at hiring a small number of top-quality professionals early on; they don’t get much publicity, but they deserve a huge amount of the credit for Gawker Media’s success.)

I certainly wouldn’t advise that those employees sell. For one thing, standard valuations in the blog space tend to be around 6X revenues, which would make Gawker Media worth $100 million or so. But the really big money for minority shareholders comes if Denton ever allows in a minority strategic investor. Right now, in the tiny secondary market for Gawker shares, Denton is the only buyer. But if a deep-pocketed strategic investor comes along, that investor will happily buy up other shareholders’ stakes at valuations well north of $100 million.

Meanwhile, shareholders are at least getting some kind of dividend on their Gawker Media shares. So unless they’re really desperate for the cash, I doubt that Denton’s getting many takers at his $30 million valuation. Even if that means he’s offering a seven-figure sum to some of his shareholder-employees.

The WSJ splashes the results of a major investigation on its front page today — so major, indeed, that it has its own ominous “On The Inside” logo. Clearly, a lot of work went into this:

At least 72 aides on both sides of the aisle traded shares of companies that their bosses help oversee, according to a Wall Street Journal analysis of more than 3,000 disclosure forms covering trading activity by Capitol Hill staffers for 2008 and 2009.

I’m glad that the WSJ is keeping Congress accountable, here — but I’m much less impressed by the way in which the newspaper is over-egging its findings.

The WSJ story is shot through with the implication that there’s a big scandal here, but I don’t see it. Instead, I see a lot of subtle rhetorical tricks, like the way in which the paper leads with a single profitable trade by a single staffer.

The fact is that if you took two years of trading data from 1,700 upper-middle-class American households, you’d certainly find a handful of profitable trades in there. And there’s no indication in the WSJ story that what they found was anything more than you’d expect from chance alone.

For instance, the WSJ says that just 72 of those 1,700 Congressional staffers “traded shares of companies that their bosses help oversee”. That’s about 4%. And the WSJ doesn’t say how many other stocks those 72 staffers traded — there’s no indication that any of them traded disproportionately in stocks that might be considered to lie in an ethical grey area. My feeling is that if you took 1,700 upper-middle-class American households and assigned them randomly to various Congressional representatives, you’d find 72 of them trading companies those representatives oversee.

There’s also no indication of how those 72 staffers fared in their trading activities overall — did they even beat the market? What’s more, after examining trading records spanning the biggest stock-market decline in living memory, the WSJ has found exactly zero suspicious trades on the short side. Even the trades in Fannie and Freddie were long-only day-trades made by the husband of a staffer for Nancy Pelosi.

The story talks about a going-nowhere piece of legislation which would prevent members and employees of Congress from trading securities based on nonpublic information they obtain. It’s a good piece of legislation, and its passage would strengthen civil society. But as far as I can see, there’s nothing in this story which implies that the bill needs to be passed in order to solve a clear and present problem.

If there were Congressional staffers who were making lots of money by taking advantage of nonpublic information, then the case for the bill would be even stronger. The WSJ went digging in an attempt to make that case. But ultimately what they came up with, I think, was pretty thin stuff. Which is good news: it’s not like anybody wants Congressional staffers to be doing such things. But let’s not try to gin up a scandal where none exists.

More than two thirds of state attorneys general plan to launch a joint probe into fraudulent mortgage paperwork — Reuters

The New Yorker profiles Nick Denton — TNY

Peter Thiel on how college is like a subprime mortgage: both involve lots of debt, selling it as an “investment” — WSJ

Paladino Attacks Gays in Brooklyn Speech — NYT

How to Make Visa Obey Your Every Desire: The Credit Card Concierge Experiment — 4HWW

The schizophrenia of the art world, booming and suffering at the same time — Artnet

AO Scott on Inside Job — NYT

Ask your lender to produce a copy of the original note on your mortgage — Where’s the Note

“If we can’t do even this — if we can’t follow through on a project so obviously needed, so clearly in the interests of the state and the nation — what hope is there for America?” — Krugman