Felix Salmon

This year’s Davos was all about tail risk — or, more to the point, the absence thereof. The ECB’s Mario Draghi said — more than once — that he had “removed the tail risk from the euro”. His colleague Ignazio Visco went almost as far, saying that only a few tail risks remain. The EU’s Olli Rehn talked about how there’s “no tail risk” any more. The IMF’s Zhu Min said that “In Europe, the tail risk has been moved off the table”, which was exactly the same language also used by Ray Dalio. Bank of America CEO Brian Moynihan said that “euro tail risk is now sorted”. The FT editorialized about the best policy response when “the tail risk of renewed financial chaos is reduced”. Even Nouriel Roubini declared that tail risks have declined in the past six months, although they haven’t gone away. And that was just the on-the-record comments: off the record, many more people, including at least one official US representative, were saying the same thing.

It was enough for both incoming Bank of England chief Mark Carney and UBS’s Alex Weber to start cracking jokes about how tail risks had been reduced on Wednesday and downright eliminated by Friday. As Stephanie Flanders says, Davos wouldn’t be Davos if people weren’t constantly talking about the need to avoid complacency — but for once, this year, “there seemed a genuine risk of it breaking out”.

There’s a worrying trend here, and it’s not complacency. Rather, it’s the use of the term “tail risk” to mean “priced-in and foreseeable euro crisis”. Last year, everybody was worried that Greece could end up leaving the euro, and those worries were reflected in European markets. This year, those worries have abated somewhat. But please, let’s not use the term “tail risk” to refer to such things.

We live in a fat-tailed world: everybody at Davos would probably agree on that. But here’s what none of them seem to understand: tail risks, by definition, can’t be measured. If you can look at a certain risk and determine that it has gone down, then it’s not a tail risk: it’s something else. Let’s say that last year there was a 25% chance that Greece would leave the euro: if something has a 25% chance of happening, it’s not a tail risk any more, it’s just a risk. If you’re planning a trip to the Grand Canyon, you might think about buying travel insurance to cover yourself in the event you are seriously injured. But when you’re right up at the edge of the canyon and the ground starts slipping beneath your feet, at that point you have to actually do something to avoid injury or death. The risk has gone from being theoretical to being real — and at that point it’s not a tail risk any more, it’s a real possibility with a scarily high probability.

The World Economic Forum spends many millions of dollars every year looking at risks both imminent and remote. It’s a useful exercise, and helps to remind us how complex the world is: with so many moving parts, it’s impossible for anybody to have much success as a predictor of the future. What’s not a useful exercise is to try to quantify the world’s risks, and to make determinations as to whether the tails are getting thinner.

And it’s certainly not a useful exercise, when markets have calmed down a little, to turn around and say that something as momentous as a fully-fledged euro crisis was only ever a “tail risk” to begin with. It wasn’t: it was much more imminent than that, and in order to avert it the EU had to venture far into the realm of policy actions which only a few months earlier would have been unthinkable. (Including effectively writing off a large amount of the money Greece owes the official sector.)

Tails are the realm of unknown unknowns. They can be positive, like the discovery of antibiotics, or they can be negative, like the uncovering of Bernie Madoff. In markets, they’re not even real-world events at all: they’re just any large move of say three standard deviations or more. Such moves happen almost every week, in some market somewhere, and they happen pretty much randomly. Measuring risks is good; seeing those risks diminish is pleasurable. But let’s not refer to measurable risks as “tail risks”. Because tail risks are always hidden, and unexpected.

Frank Tantillo has a good overview of the inescapable country-branding exercises that happen in Davos every year; this year Azerbaijan was rivaling India in the ubiquity stakes, while countries like Peru and Japan made do with events.

Countries in Davos behave much like corporations: they brand themselves, they throw parties, they maneuver to ensure that their high-level representatives appear on the most important panels. And while the highest-profile heads of state, like Angela Merkel, are at the very top of the Davos pecking order, the general mass of presidents and prime ministers (there were more than 50 heads of state in attendance) are clearly less important, here, than Davos stars like Larry Summers, Henry Kissinger, or even Nouriel Roubini. The question to ask yourself is: given the choice, who would the average global CEO or hedge-fund manager rather meet. And put like that, it’s easy to see how Danny Kahneman outranks the president of Guatemala.

As a result, countries and corporations alike (including Thomson Reuters) put a significant amount of time and money into trying to capture the attention of the assembled plutocrats. Those efforts range from big public ad campaigns (Azerbaijan) to small intimate dinners (Google), with lots of off-the-record schmoozing in between. If you’re a high-level journalist in Davos (Fareed Zakaria, say), you’ll be swamped with invitations to have an informal discussion with various presidents and prime ministers: while it’s commonplace to note how Davos is great at allowing CEOs to set up dozens of meetings with each other, it’s less well understood how Davos serves the same kind of speed-dating function for interactions between governments and the international press.

There’s always the risk, however, that a carefully-orchestrated branding strategy will backfire. For instance, the prize for the most obnoxious party in Davos — which was won by the Wine Forum in 2011 — was easily snaffled this year by Sean Parker and Ian Osborne, who spent some mind-boggling amount of money putting together a party which (I swear I’m not making this up) was billed as a “future of philanthropy nightcap”. (In Davos, for reasons I’ve never understood, any party which starts after dinner has to call itself a “nightcap”.)

Parker and Osborne, who decided to throw their party under the auspices of a semi-fictional special-purpose company called The Montagnard Group, flew in both John Legend and Mark Ronson for the event: the scuttlebutt was that Jay-Z turned them down. There wasn’t just an expensive sommelier with a very high-end wine list; they brought in someone else to do the same thing with whisky. They also transformed a local Davos nightclub, putting up walls, installing taxidermy, and getting half of Davos asking why on earth these guys thought it was a good idea to schlep a stuffed water buffalo up an Alp, especially one with green lasers shining out of its eyes. Generally the whole thing reeked of excess, which maybe explains why Lloyd Blankfein stayed for hours, and how the party was the hottest ticket in town, with normally-sensible CEOs all but begging for an invite.

The Montagnard party was particularly weird because it wasn’t promoting a company or country: it felt like a piece of obscenely expensive performance art, sending up the way in which conspicuous consumption gets rebounded as “philanthropy” in order to give it a veneer of sophistication. Or maybe the whole thing was just an elaborate joke, decipherable only to Parker, Osborne, and their co-host, Marc Benioff of Salesforce. Either way, it was exclusive, expensive, and excessive: it allowed the real Sean Parker to handily trump anything the Justin Timberlake character in The Social Network could have dreamed of.

Which brings me to Russia. The Russian Federation, like most countries at Davos, was engaged in both overt and covert branding. And while the overt branding was a huge success, the quieter schmoozing backfired massively.

The big Russian Federation party, interestingly enough, took place at exactly the same time as the Sean Parker party, and it was a triumph. Where Parker had a carefully-tended guest list, the Russian doors were wide open; where Parker had fine wines, the Russians had trays of vodka shots; where Parker’s party was dominated by men in suits, the Russians found a much happier crowd, determined to party, dressed down rather than up. The entertainment was Leningrad, a 14-piece gypsy-punk band (think Gogol Bordello, but better), and the venue was a huge white tent erected across from the train station, which helped to avoid the overheating problem endemic to popular Davos parties.

The event was as unapologetically Russian as the Olympic opening ceremonies were unapologetically British: rather than putting a tasteful national twist on a standard Swiss party, those of us who couldn’t speak Russian or decipher cyrillic were happily baffled by most of what was going on. (The bafflement chez Parker was rather different.) The vodka and Champagne were flowing freely, the crowd was pogoing madly, and the whole thing succeeded spectacularly in being that rarest of Davos events: a place where you could genuinely enjoy yourself and let your hair down, rather than eyeing name badges and mingling politely.

There was corporate sponsorship — Vadim Belyaev, the chairman of Otkritie Financial Corporation, joined the band gamely at the end of the evening — but the night really belonged to the revelers. This was the party where you found the TV-station technicians who had been freezing on top of the Conference Center all day; the drivers and waiters and musicians and other support staff whose job is to be as invisible as possible most of the time; generally, the 99% of Davos, rather than the 1% that you normally hear about. This year in particular, when the number of parties shrank and door policies tightened up across the board, it was fantastic to see a party where literally everybody in Davos was welcome.

The morning after its party, however, Russia ran straight into a PR nightmare stemming from a much more exclusive event. Prime minister Dmitry Medvedev was in town, and gave an off-the-record press briefing to some 20 international journalists. The ground rules were clearly designed so as to prevent any of Medvedev’s comments being made public, but when Medvedev said something which could easily be interpreted as a direct threat against Hermitage Capital’s Bill Browder, a number of the journalists in the meeting went immediately to Browder to tell him what the Russian prime minister was saying about him. And then Browder, who understandably cares more about his own personal safety than he does about the nuances of Chatham House attribution, immediately went on the record to Reuters, telling the world what he had heard.

In the space of less than 24 hours, then, Davos saw Russia at its best and at its worst: open and closed, free and fearsome, fun and deadly. On net, maybe the country would have been better off just buying a bunch of ads on the side of buses. But probably no one in Russia — least of all Dmitry Medvedev — much cares.

Russians know how to have a good time, and they also live in an incredibly violent state-dominated society. Neither of these things is exactly a secret, and no one’s looking to change anybody else’s mind on either front. Anybody doing business in Russia today is doing so with their eyes wide open. Let the rest of the world go to Davos to present itself in the best possible light. Russia will just continue being Russia — in good ways and in bad.

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The world’s oldest bank is facing a very modern problem: almost $1 billion in derivatives losses which have only recently been discovered by management.

Monte dei Paschi di Siena (or Mountain of Piety of Siena, and MPS for short), founded in 1472 and Italy’s third-largest lender, says it may lose a total of $956 million on three derivatives trades. The trades, put on between 2006 and 2009, were referred to as “Alexandria”, “Santorini”, and “Nota Italia”.

Reuters’ Silvia Aloisi and Stephen Jewkes report that Alexandria was closed out in 2012, while the Santorini trade was liquidated in 2009. The Nota Italia trade was restructured and remains open. If you want to  understand the Santorini deal, the place to go is this Bloomberg story, by Elisa Martinuzzi and Nick Dunbar; it seems to have started with a complex equity derivative, and snowballed from there.

MPS received a $2.5 billion bailout last June. Now it is likely to request an additional $5.2 billion in state-backed bonds next week to shore up its capital position.

The political fallout from the disclosure of the losses has been quick: the current head of the Italian banking association, a former MPS executive, has resigned. Italian prime minister Mario Monti is being sharply criticized — as is ECB chief Mario Draghi, who was responsible for regulating MPS at the time of the trades,  as head of the Bank of Italy. The central bank says that it only found out about the existence of the trades “following the discovery of documents kept hidden from the supervisory authority and brought to light by the new management of MPS”. MPS’s board, for its part, says it didn’t review or approve at least one of the three trades.

Regulatory and criminal investigations are now reportedly underway. That’s helpful, because there’s still a lot we don’t know about a story that already reads like a fevered collaboration between Dan Brown, Matt Taibbi, and Larry Summers. — Ben Walsh

On to today’s links:

Alpha
Rollergirl who met Herbalife distributor in online knitting forum hits back at short-sellers – Planet Money

Legalese
AIG put a lot of thought into its obvious decision not to sue the government – Matt Levine

Departures
An extended exit interview with Tim Geithner – Liaquat Ahamed

EU Mess
On the bright side, it’s “too early to tell” if the UK economy will enter a triple-dip recession – WSJ

Davos
The Davos hive mind says the financial crisis is over, but a credit market bubble may be coming – Businessweek
A handy guide to Davos-speak – Ryan McCarthy
The Davos phrase generator – Heidi Moore
“Azerbaijan, Land of the Future.”: Advertising in Davos – Frank Tantillo

Innovation
Awful job made bearable by dinosaur socks – Business Insider

Huh
J.J. Abhrams will direct the new Star Wars movie – Deadline

Oxpeckers
The challenges of conversational journalism – Jason Kottke

Charts
Two charts on unions and income inequality – Mother Jones

Many congratulations to Stephen Fidler, who has managed to get some actual news in Davos: EU economics commissioner Olli Rehn went on the record telling him that Cyprus is going to have to restructure its debt — just two weeks after ruling such a thing out.

That might come as little surprise, given that Cypriot banks were loaded up to the gills with Greek debt, and Greek debt suffered a 70% haircut. Cyprus is tiny, and could never afford the €17 billion needed to bail out the banks and the government — especially since that would bring the country’s debt load up to more than 140% of GDP.

Still, after the EU forced Greece to default, it drew a line in the sand: no more sovereign defaults, it said, since Greece was “unique and exceptional”. So this does go to show that you can’t really trust Europe’s promises. What’s more, Cyprus’s now-certain restructuring is going to be significantly messier than Greece’s was.

Greece’s debt restructuring was essentially unstoppable for one main reason: most of its debt was issued under domestic law, rather than foreign law. A tweak to domestic law, and suddenly the vast majority of Greece’s creditors were bailed in to any deal, whether they voted for it or not. Cyprus, in contrast, doesn’t have that luxury: its bonds are mostly issued under foreign law. And that means any restructuring is going to be much more difficult.

Lee Buchheit and Mitu Gulati have a potential solution to that problem, which involves amending the treaty governing the European Stability Mechanism. But the other big problem in Cyprus will still loom: the question of the country’s bank deposits.

In a country like Cyprus (or Iceland, or Switzerland), where the banking sector is many multiples of national GDP, there’s very little distinction between rescuing the banks and rescuing the country. And if the asset side of the banks’ balance sheet is full of Greek sovereign debt, the liability side is equally dodgy: Cyprus is a notorious center of dodgy offshore banking, especially for Russians. If Cyprus is going to restructure its liabilities, it’s going to have to face one huge question: will those restructured liabilities include Russian and other foreign deposits?

If there’s any hint that Cyprus might force foreign depositors to take some kind of haircut, of course, there will be a massive run for the exits, and Cyprus’s current solvency problem will become a much more serious and immediate liquidity problem. The last thing that Cyprus or any other country needs is a bank run, which will leave the national balance sheet in the classic pinch where “on the left, nothing’s right, and on the right, nothing’s left”. What’s more, in many ways the precedent of forcing depositors to take a haircut would be even more damaging than the precedent of imposing a haircut on Greek bondholders: at that point there would be really no reason at all to have deposits in any Mediterranean country.

That said, foreign deposits in Cyprus amount to some €30 billion: the opportunity cost of protecting them in full, while imposing a substantial haircut on Cyprus’s bonded creditors, would be huge.

So even if Europe has made its first big decision — to force Cyprus to default — it still faces many more. Should it amend the ESM treaty to make any restructuring easier? Should it impose a haircut on Cyprus’s uninsured depositors? And how can it structure the process to minimize the chances of a messy bank run, default, and possibly even exit from the euro? It’s easy to dismiss Cyprus as too small to worry about. But it’s still an important sovereign state. And if the EU missteps on Cyprus, that would bode very ill for any similar problems in bigger eurozone countries in the future.

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Finance is in the midst of its very own jobless recovery. The money side of things is going great: the S&P 500 is at its highest level since 2007, and banks are producing astonishing profits, both dull and less dull.

Bank employees, on the other hand, aren’t faring so well. Commerzbank today announced it’s shedding up to 6,000 jobs. UniCredit is cutting 1,000 jobs in its German unit. Lloyds has announced 1,300 job cuts this month and Barclays is jettisoning 2,000 workers.

And they’re just catching up to their US competitors. Citi infamously “repositioned” 11,000 people out of work in December, while Morgan Stanley more recently decided to cut 1,600 jobs.

As Bloomberg’s Michael Moore points out, Wall Street’s bulge bracket is slimming down. UBS is ridding itself of 10,000 employees and closing its fixed-income business, while RBS is getting out of the equities, advisory, and equity capital markets businesses. It’s estimated that more than 500,000 financial sector jobs have been lost in the US and UK since 2008.

Matt Yglesias writes that glee is the wrong response to this trend:

The financial sector isn’t all moustache-twirling fatcat CEOs. Lots of people work at these banks in lots of different kinds of jobs, and nobody likes to see anyone lose theirs. But at the same time these waves of layoffs… emphasize that to a perhaps larger degree than is generally recognized, the financial sector really is shrinking.

If you still have a job in finance, then, now is maybe not the time to complain about barely getting paid more than minimum wage. — Ben Walsh

On to today’s links:

EU Mess
Spanish unemployment hits record – Reuters

Charts
The US government spends far more on healthcare than Canada (which has socialized medicine) – Matt Yglesias
Apple’s semi-soft quarter – Dan Frommer

Crisis Retro
Morgan Stanley sold a security its own employee called “nuclear holocaust” – Jesse Eisinger
“Nobody knows anything, every trade has two sides, some people are wrong ex post” – Matt Levine

Popular Myths
The biggest problem with the US deficit? It’s shrinking too quickly – Mike Konczal

Leaders
“Jargon is not meaningless as long as it is strategic, measurable, and scalable” – McSweeney’s

Davos
Davos as a “positional good” – John Cassidy
“The corridors will be renamed ‘happenstance alphazones’” – FT
“The central bankers who saved the world economy are now being told they risk hurting it” – Bloomberg

Wonks
No, the world is not done deleveraging – FT Alphaville

Departures
Neel Kashkari is leaving PIMCO for California politics – WSJ

Cephalopods
Goldman Sachs not negligent in the performance of due diligence it did not perform – Reuters

Regulations
A handy guide to the changes to Basel III – Economics of Contempt

Sad Declines
Union membership falls to the lowest level in 76 years – Reuters

Alpha
Who wants some construction risk? – Professional Pensions

Possibly Useless Data
The Federal government owns oil and gas oil and gas worth $128 trillion (or a lot, lot less) – Marginal Revolution

The best conference panels, like the best blog posts, are the ones which change your mind. And while I haven’t done a U-turn on anything, after yesterday’s panel on smart cars I’m now thinking very differently about the relative merits of various ways of improving how we move around where we live and travel. While I’ve generally been a fan of just about any alternative to the automobile, now I’m not so sure: I think that smart car technology is improving impressively, to the point at which it could be the most promising solution, especially in developed parts of the world like California.

One reason is simply fiscal. Projects like the self-driving car, and the Sartre platooning project in Europe, move the costs of new technology onto companies (Google) and individuals (people buying smart cars). As such, while the total amount of money spent might well be enormous, the money doesn’t need to be spent up-front by any state or national government. That stands in stark contrast, of course, to rail projects, which cost billions of dollars up front; if they ever do pay for themselves, they do so only very slowly.

It makes perfect sense for dense urban areas to invest in subway systems, of course — as China is doing; India should follow suit. A pedestrian-friendly city with a great bike-path network and a fast subway system is basically any urbanist’s dream, both energy-efficient and reasonably low-tech. But between cities and suburbs, or between cities, you need other ways of getting around. And here there are real choices to be made, between rail and roads. Or rather, given that roads are necessary, do you build roads and railways, or can you solve all your problems with roads alone?

China of course is happily blasting new railways through the country as part of its massive national-infrastructure project. But the more developed a country becomes, the more expensive and time-consuming any new rail line will be. And if you’re looking out say 20 years, there’s a pretty strong case to be made that the kind of efficiency that we can get today only on rail lines will in future be available on roads as well — with significantly greater comfort and convenience for passengers.

Right now, technology is arguably making roads and cars more dangerous. Drivers are notoriously bad judges of their own driving ability, and they’re increasingly being distracted by devices — not just text messages, any more, but fully-fledged emails, social-media alerts, and even videos. What’s more, when car manufacturers roll out things like stay-in-lane technology, that just makes drivers feel even safer, so they feel as though they have some kind of permission to spend even more time on their phones, and less time paying attention to the highway. The results can be disastrous.

But once we make it all the way into a platoon, or in a self-driving car, then at that point we become significantly safer than even the safest human driver. While we’re very bad judges of our own driving ability, we’re actually incredibly good at intuiting how safe our driver is when we’re a passenger. And the experience of people in self-driving cars is that after no more than about 10 minutes, they relax, feel very safe, and are very happy letting the car take them where they want to go. They even relax so much, I’m told, that they lose the desire to speed — maybe because they know that they’re getting where they’re going, and in the meantime can lose themselves in their phones.

If and when self-driving cars really start taking off, it’s easy to see where the road leads. Firstly, they probably won’t be operated on the owner-occupier model that we use for cars today, where we have to leave our cars parked for 97% of their lives just so that we know they’re going to be available for us when we need them. Given driverless cars’ ability to come pick you up whenever you need one, it makes much more sense to just join a network of such things, giving you the same ability to drive your car when you’re at home, or in a far-flung city, or whenever you might normally take a taxi. And the consequence of that is much less need for parking (right now there are more than three parking spots for every car), and therefore the freeing up of lots of space currently given over to parking spots.

What’s more, the capacity of all that freed-up space will be much greater than the capacity of our current roads. Put enough platoons and self-driving cars onto the road, and it’s entirely conceivable that the number of vehicle-miles driven per hour, on any given stretch of road, could double from its current level, even without any increase in the speed limit. Then, take account of the fact that vehicle mileage will continue to improve. The result is that with existing dumb roads, we could wind up moving more people more miles for less total energy expenditure in cars — even when most of those cars continue to have just one person in them — than by forcing those people to cluster together and take huge, heavy trains instead.

This vision creates a dilemma, when we start facing choices about building rail lines or new suburbs. We’re not in a self-driving-car utopia yet, and the transportation problems we have are both real and solvable using rail. So do we use the tools we have, or do we wait and hope that future technology will solve our problems in a more efficient way?

And the question of building infrastructure applies to cars, too: do we just allow the auto industry to build ever more efficient gas-powered vehicles, which will eventually become self-driving, or do we spend billions of dollars building out an infrastructure capable of supporting and recharging electric cars wanting to travel substantial distances? Again, whatever solutions we put in now could end up being obsolete surprisingly quickly.

So while I’m convinced that now is an excellent time for the US to embark on a substantial round of infrastructure investment, I’m less convinced that we should be investing in rail in particular. A smart electricity grid, definitely. Improvements on existing bridges and tunnels, absolutely, including that new tunnel to New Jersey. But I’m less convinced about things like a high-speed rail link between San Francisco and LA. Especially so long as there aren’t any self-driving cars to pick up passengers when they arrive.

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David Cameron is definitely up to something. The weird thing is that no one, himself included, seems to know exactly what.

The UK Prime Minister promised, today, to give Britons a referendum on their EU membership by 2017 — if his Conservative party gets re-elected. It’s a perplexing ploy for many reasons.

The more the anti-Continental UK press talks about a British exit, or Brexit (yes, this is a thing now), the more the public wants to stay in the EU. 40% now favor the status quo, which was established with 67% approval in 1976. That’s up from 30% in November, 2012. Cameron’s own party isn’t fully on board, never a good sign in a parliamentary system, and particularly in one led by a coalition government. The referendum might not even happen: the Tories have to win the next election first, and at the moment Cameron’s party has an approval rating of just 32%.

Open Europe Blog has a great round-up of reactions from European politicians, who are blasting Cameron with an array of metaphors. French Foreign Minister Laurent Fabius described Cameron as someone who joined a soccer team, only to decide “let’s play rugby.” Less charitably, former EU trade commissioner Peter Mandelson called the speech “schizophrenic.” And France is ready to just call the UK’s bluff and let them leave. In the end, it’s very likely that Britain is simply bluffing, and all it will have to show from doing so is fewer allies.

The announcement of the referendum has also brought economic uncertainty back into British politics. Britain’s EU membership gives it essentially unfettered access to the world’s largest single market — along with an annual GDP boost of almost $40 billion, or about $640 per UK resident per year.

Even more uncertain is how these types of proposals play out once they are announced. As Joshua Tucker writes, the example of the dissolution of Czechoslovakia shows that simply proposing a referendum makes a UK exit from the EU much more likely. Even if Cameron decides to campaign for Britain to remain in the EU, “once these things get out of the box, they can acquire a life of their own.”

Perhaps Cameron, as the UK economy continues to struggle, just wants to score some populist points in a country where, despite inventive verbal invective being something of a national pastime, being called “European” remains an unanswerable insult. — Ben Walsh

On to today’s links:

Apple
The inside story of the surprising rise of Siri at Apple – Bianca Bosker

Tax Arcana
Raising taxes on every American could save the government as we know it – Eduardo Porter

Financial Arcana
The “Robin Hood” financial transaction tax is moving forward in Europe – NYT
The big bank exec at Davos who is actually pushing his bank to shrink – Bloomberg

Earnings
McDonald’s financially satiated by reconstituted pork product, dollar menu – Bloomberg

Terrifying
The NFL has a 225% injury rate – Esquire

Old Normal
“Only 19% of people supported a tax cut” – Bruce Bartlett

Davos
In Russia, corruption worries about you…or something – Bloomberg
The party isn’t over — it’s just being downsized – Felix

Ugh
Donald Trump exploring improbably ways of buying the NYT – NY Mag

Andrew Ross Sorkin has placed himself on the party beat at Davos: since nothing has happened yet, the main thing to report is that everybody’s Friday-night dance card is looking pretty forlorn. The Google party being canceled we could live with, but the cancellation of the Accel party is bigger news — people really loved that one. Yahoo’s cocktail party early in the evening isn’t going to make up the difference, and Sean Parker’s nightclub event, while surely hard to get in to, is certainly going to turn into the kind of loud and overcrowded sausage party that makes you wonder why you even wanted to go there in the first place.

Sorkin’s headline asks whether the Davos party is over. The answer is no, of course — but it can be interesting to keep an eye on the permanent tension between the World Economic Forum, on the one hand, and Davos more generally, on the other. The two are generally considered interchangeable, which annoys the WEF no end: the vision of Klaus Schwab is for a pretty austere conference taking place at the Conference Center, with little or nothing going on in the rest of town. But of course no self-respecting global organization is going to pass up this annual opportunity to impress thousands of plutocrats by any means necessary.

The result is endless and futile overt and covert strong-arming by the WEF to (a) try to minimize the number of non-WEF events in Davos; and (b) try to ensure that insofar as non-WEF events are certainly going to happen, at least they don’t clash too badly with the formal WEF program. And since the covert strong-arming wasn’t working very well, the WEF is getting more overt, with a very detailed Code of Conduct that they make all participants agree to when they register for the conference.

“Concern is growing,” explains the Code, “that the unique and special nature of the Annual Meeting is being jeopardized by behaviour and activities contrary to the ‘spirit of Davos’”. As a result, everybody here is “expected to respect the non-commercial nature of the event”; “avoid organizing private events or functions that conflict with the programme of the Annual Meeting”; and “not extend invitations to guests who are not registered participants in the Annual Meeting”. On top of that, it’s an explicit violation of the Code to “pay honoraria to speakers at private events or activities organized during the Annual Meeting regardless of whether or not they are participants in the Annual Meeting”.

Not everybody respects the code, of course. Ukrainian billionaire Victor Pinchuk flouts it most visibly, every year, with a huge event at the Morosani hotel. But even the WEF-iest companies seem to be happy to break the code whenever they feel like it. Pepsico CEO Indra Nooyi, for instance, has been a co-chair of the entire meeting in the past, and is still deeply involved in the organization. And yet at lunchtime today she’ll be at something called the Pepsico Cafe, not particularly close to the conference, hosting a lunch with — of all people — Derek Jeter.

Still, the pendulum does seem to be swinging back, a little bit, from Davos towards the WEF. And that’s probably a good thing if only because it might allow the people here to get a bit more sleep. Davos will never be relaxing, of course. But this morning I was very impressed to hear Heather McGregor, the FT’s Mrs Moneypenny columnist, declare after doing a TV hit that she was heading back to her flat to sit back and enjoy the spectacular Alpine view, rather than launching headlong into conference schmoozing. Maybe the smart new way of organizing private events at Davos is to make sure that they only involve yourself.

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The world’s plutocrats are currently heading to a more “dynamically resilient” — and possibly more complacent – Davos. Don’t expect much introspection, and definitely don’t expect much debate on the hard-to-define “value of finance”.

At the DLD Conference in Munich today, Peter Thiel had an interesting take on the rise of financial services. America’s past 80 years, he said, can be divided into two periods: From 1933 to 1973, real incomes rose 350%; from 1973 to 2013, they rose just 20%. While Americans have remained optimistic about economic growth, Thiel thinks they’ve become uncertain about its sources. That uncertainty, Thiel says, drives Americans to try to benefit from the economic value of others rather than creating it themselves. Because of this, investing in markets generally takes priority over funding specific businesses.

Thiel’s theory of how America prefers to take risks may help explain why the financial reform has been so slow. Washington has been working on finalizing the Dodd-Frank financial reform laws for four years, and it will be another four before we know if it worked, the Washington Post’s Suzy Khimm writes. Along the way, regulators have missed 37% of their rulemaking deadlines. It’s not that the sweeping Dodd-Frank bill has been delayed in full — Jared Bernstein notes that the Consumer Financial Protection Board is thankfully up and running. But the wait to see the Volcker Rule, in particular, will be a long one, Dan Primack writes: Goldman Sachs has gotten around the rule by simply waiting for it to be finalized.

Thiel’s theory also helps explain why today’s reforms aren’t likely to change finance’s role in the economy, and why the white-collar service sector more broadly is a larger and larger part of GDP. It also provides a structural rationale for Bob Rubin’s twenty years of “extraordinary proximity to political power”. — Ben Walsh

On to today’s links:

What could go wrong
The new “holy grail” for money managers: leveraged bonds and derivatives - WSJ

Prophecies
A short history of wildly inaccurate predictions made at Davos – Andrew Ross Sorkin

Central Banking
Bank of Japan notices last decade or so hasn’t been great, raises inflation target – BOJ

Wonks
The case for deficit optimism – Ezra Klein
A conman faked a career as an economist and became an adviser to the World Bank – Independent
Inequality is holding back America’s economic growth – Joseph Stiglitz
Yes, you can have full employment “based on purchases of yachts, luxury cars, and the services of personal trainers” – Paul Krugman
Why financial markets are inefficient – Roger E.A. Farmer

Facebook
Feelings are hard to forget – Science

Missed Opportunities
Why we don’t have a la carte pricing in cable TV – Sports Economist

TBTF
Regulators have asked Germany’s biggest bank to simulate its own break-up – Bloomberg

Alpha
Long weight-loss, short eternal youth – NYP
A bunch of hedge fund managers jump in a freezing lake for some reason – Bloomberg

EU Mess
And now workers at 3 bailed-out Spanish banks are going on strike – Reuters

Oxpeckers
Lionel Barber’s full memo to FT staff outlining a “digital-first” strategy – Guardian

Bundesbank president Jens Weidmann gave a speech yesterday in which he warned of “increased politicisation of exchange rates” and a potential “devaluation competition” between currency zones. The speech was timely: it came as the Bank of Japan doubled its inflation target to 2%, adding fuel to the strong trend of the past six months, where the euro has been appreciating while the yen has been getting significantly weaker.

It’s easy to see what Weidmann is worried about here: according to UniCredit economist Marco Valli, a 10% rise in the euro’s value will reduce eurozone GDP growth by 0.8%. On top of that, Weidmann is certainly right that the Bank of Japan has become increasingly politicized, and it’s less independent than it used to be.

But it’s worth having a bit of perspective, here. Firstly the euro is still much more competitive, against the yen, than it was before the crisis. Here’s the five-year chart, which shows that if there’s any competitive devaluing going on, then Europe did it first.

And of course neither currency zone is really engaged in any kind of currency war at all — what we’re seeing here is just the natural consequence of growth expectations and the interest rates that result from them.

Interestingly, Weidmann kicked off his speech — well before the “independence of central banks in danger” section — by quoting economist Michael Woodford with approval: “Not only do expectations about policy matter, but (…) very little else matters.” And really all we’re seeing in Japan is the first real effort from the central bank to wrestle with the implications of that fact, and to try to force the Japanese population into a stance where it genuinely expects inflation rather than deflation. (Deflation, of course, is something of a self-fulfilling prophecy: if you expect prices to fall, then you’ll hold on to your money rather than spend it, which causes prices to fall.)

What’s more, the fact is that Japan is more likely to fail than to succeed: like most Japanese policy actions for the past couple of decades, this one looks like it’s too little, too late. When it comes to 2% inflation, the reasonable stance of the Japanese population is “I’ll believe it when I see it” — which in turn means that they’re not going to do either, any time soon.

I’m sure that the Japanese government is happy about the weakening yen. But these are not the opening salvos in some new currency war: instead, the yen should be getting cheaper, just because the Japanese central bank should be doing everything in its power to increase inflation expectations and nominal GDP growth. This move is what you’d expect if the yen moved in line with the kind of monetary policy that makes sense.

And as for central bank independence — well, that battle was lost during the financial crisis, I’m afraid. When it comes to globally coordinated policy actions, central banks should not be independent, and in general the more independent they are, the less effective they have been. Nominal independence is a good thing: we don’t want the finance minister announcing interest rate moves, as used to happen in the UK until about 15 years ago. Central bankers are like judges: they should be technocrats, rather than politicians.

But the fact is that the last genuinely independent central banker was Alan Greenspan, who blew two enormous bubbles and was in many ways the prime cause of the global financial crisis — mostly by being far too laissez-faire, and keeping interest rates far too low for far too long. Central bank independence gave him the kind of credibility that he’d never have had if the president had been setting the exact same monetary policy, more’s the pity.

For the time being, then, let’s not worry too much about central bank independence or about currency wars. Global interest rates are very low and are going to stay very low for the foreseeable future, and that’s pretty much all the monetary policy that the world has. Currencies will fluctuate, of course. But don’t blame central bankers for that.

I’m in Munich, for the DLD conference, where Ben Horowitz took the opportunity to introduce the Rap Genius guys to the European digital-media crowd. But it’s actually Horowitz’s partner, Marc Andreessen, who has the best explanation of what the investment is all about:

Back in 1993, when Eric Bina and I were first building Mosaic, it seemed obvious to us that users would want to annotate all text on the web – our idea was that each web page would be a launchpad for insight and debate about its own contents. So we built a feature called “group annotations” right into the browser – and it worked great – all users could comment on any page and discussions quickly ensued. Unfortunately, our implementation at that time required a server to host all the annotations, and we didn’t have the time to properly build that server, which would obviously have had to scale to enormous size. And so we dropped the entire feature.

Andreessen calls this “annotate the world“, and, as he notes in his post, it’s a very old idea indeed; the prime example is of course the Talmud, although you can probably trace it back to Socrates and even earlier. Up until now, however, annotation has been given short shrift on the web.

We’ve had a few other things instead: there’s commenting, of course, which is being constantly reinvented but never seems to be done well, and there’s also the kind of layered editing history one finds at Wikipedia, which is very hard to navigate. The promise of Rap Genius is to take the granularity and teleological iteration of Wikipedia edits, and make give them the visibility of a comments section.

But is the opposite possible? Recently, two different people told me on the same day that they were going to launch a comments section based on annotations — where readers comment on individual sentences or paragraphs or arguments, rather than a story or post as a whole.

The promise here is twofold: it helps the conversation stay on topic, and it also raises the possibility of really improving the original post, keeping it updated and accurate, all through crowdsourced technology.

I like the idea of moving from comments to annotations, if only because existing commenting technology just hasn’t worked well at all, and just about anything else would probably be an improvement. It shouldn’t be distracting, however, which is a problem: the annotations at Rap Genius are very obvious, because they’re the heart of the site, while most bloggers and news organizations would not want to give their commenters quite that much prominence. And of course it should be social: I’m certain to be particularly interested in the comments of my friends.

The first versions of these systems are going to be clunky and annoying — version 1.0 of anything always is. The only way to learn what works in practice is to roll something out and see what happens. But if this takes off, it could be a significant evolution in the way that we talk about web content. Right now, for instance, if I want to link to something somebody said on a web page, I’ll normally just end up linking from Twitter to an undifferentiated page, rather than to the specific thing being said. And more generally, the conversation around things like blog posts tends to happen mostly on Twitter and Facebook, where it’s easy to miss and almost impossible to archive.

It would be amazing if annotation could change all that, helping to make comments more on-point and also providing a centralized archive of the conversation around any given story. I doubt that Rap Genius will be the company to do that, but internet comments are more of a bug than a feature these days, and I do think that annotation is a very promising way of potentially addressing the problems they have.

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The full transcripts of the Fed’s 2007 Open Market Committee meetings are out! To financial nerds, this is a bit like opening Christmas gifts from five years ago: some things look quaint and misguided, others seem ahead of their time.

There’s no shortage of embarrassing nuggets in the Fed’s early discussions of the financial crisis. In a March meeting, Ben Bernanke believed the housing market would stay strong; even in December, he said “I do not expect insolvency or near insolvency among any major financial institution”. There’s also cattiness: Richmond Fed President Jeffrey Lacker, as Neil Irwin pointed out, appears to accuse then New York Fed president Tim Geithner of leaking information to Bank of America’s CEO.

The transcripts also reveal a very polite, measured group of singing canaries. Binyamin Appelbaum writes that in August that the Fed “began its long transformation from somnolence to activism”, eventually cutting rates and expanding the use of the discount window. To Cardiff Garcia, if there’s a “winner” of the FOMC’s transcripts it’s Janet Yellen. In September, Yellen warned of “utter devastation” in the private equity and mortgage markets, and “severe illiquidity” in the secondary markets for mortgages, securitized products and some interbank loans. A month later, Randall Kroszner was warning of a wave of mortgage rate resets. By December, Geithner was worrying about a “deep and protracted recession”, Eric Rosengren was fretting about derivatives, and Bernanke was sure that the crisis would eventually hit Wall Street (though several members of the Fed didn’t seem to agree).

There are two larger stories here: just how long it took the Fed to catch on to what would turn out to be the biggest financial downturn since the Great Depression — though it appears Jim Cramer’s August 2007 rant about the Fed’s lack of action was basically right. It’s also about the Fed’s puzzling over — and sometimes lacking — crucial economic data. In December, Kroszner complained about the lack of good data on the mortgage market and called for “hiring people who can analyse these things”:

Something that was disheartening to me is that the Mortgage Bankers Association said that they hope by early next year to be able to provide sufficient information to the market so that people can really assess on a loan-by-loan basis what’s in their CDOs, and that’s a real concern.  The information is simply not out there.  So it’s not just confidence or concerns. People are now looking carefully and saying, ‘I just don’t have the information to be able to make an assessment.’

– Ryan McCarthy

On to today’s links:

Crisis Retro
Tim Geithner’s legacy was cementing Too Big to Fail – Simon Johnson

Charts
This is why you’re fat, America - Sarah Kliff

Demographics
Congress adds six women, loses seven businesspeople and a mustache – Businessweek

Cephalopods
Goldman making 109% more market than last year (just don’t call it trading) – John Carney

TBTF
Morgan Stanley reaches “pivot point”, increases profit 23% – Dealbook

Politicking
House Republicans consider the positives of putting off national disaster for a few months – WaPo

Do The Right Thing
The honesty of the long-distance runner – El Pais

Leaders
Jamie Dimon, transparency illusionist – Jonathan Weil

Legitimately Good News
Finally, it’s getting harder to buy a house in America – Matt Yglesias

Legalese
“The shape in question doesn’t diverge considerably from the norm or what’s usual in that sector” – Bloomberg

Takedowns
Jason Linkins tears apart an infinitely silly trend story on guns – Huffington Post

Long Reads
The best long reads of 2012 – Readlists

Today’s WSJ article on political-intelligence shops, and one called Marwood in particular, is a bit of a peculiar fish, and I’m very glad that it comes while Matt Levine’s great post yesterday on SEC insider-trading investigations is still fresh in our minds.

As Levine shows, in a fantastic take on Sheelah Kolhatkar’s Businessweek cover story about the hunt to nail Stevie Cohen, the SEC is extraordinarily diligent when it comes to insider-trading investigations. It will look at literally millions of phone calls and other communications whenever it thinks that insider trading might have taken place, and it seems to work from the assumption that if a hedge fund takes a large position in a stock before a big piece of news is announced, then that’s prima facie evidence that something fishy might have been going on, and is probably worth investigating.

In this case, clients of Marwood — a political-intelligence agency featuring various members of the Kennedy clan — received a prescient note just before a very important FDA announcement which sent shares in Amylin Pharmaceuticals tumbling. A less diligent agency would simply stop there, and say OK, the note explains why various Marwood clients might have shorted the stock in the run-up to the announcement. But the SEC has kept on going, and has now issued subpoenas to Marwood, trying to work out whether it might have had inside information.

The WSJ story paints a pretty compelling case that Marwood was just smart, rather than insidery — that it genuinely earned its money in this case. But of course the SEC is going to be dogged here, and look under every rock, before allowing itself to come to that conclusion.

Still, as Levine reminds us, “SEC investigates run-up to big stock-price move” is not much of a story. So instead the WSJ zooms out a bit, and is running with a different headline entirely: “Buying ‘Political Intelligence’ Can Pay Off Big for Wall Street”. And here’s where the WSJ starts getting into much rockier territory. Sure, in this one case, Marwood came out with some very smart and valuable intelligence — although it only made money for Wall Street if you took the right action, and not all of Marwood’s clients did that. But beyond this one event, the WSJ actually presents no real evidence at all to buttress its headline. Instead, it basically rests the entire non-Marwood part of its thesis on this one thin paragraph:

The political-intelligence business has expanded rapidly over a decade as government decisions have come to play a growing role for some on Wall Street. Investors spend more than $400 million a year for such intelligence, according to Integrity Research Associates, which follows the research industry. Its founder, Michael Mayhew, said hedge funds tell him the “single largest source of gains for them has been what’s going on in Washington.”

It’s surely true that hedge funds pay a lot more attention to Washington today than they did a decade ago. But the WSJ never defines what it means by “political intelligence”, and I suspect that a huge amount of the business is just shops like Eurasia Group or Medley Global Advisors, thinking deep thoughts about political realities and charging their clients large amounts of money for them.

There’s that big number, though, too: would hedge funds pay $400 million a year for something if it didn’t give them a slightly bigger edge than that? Well, the fact is that they don’t pay $400 million a year for political intelligence. Michael Mayhew, the source of that number, is talking his book here, and the WSJ should have been much more skeptical. Because here is where the $400 million comes from:

Based on Integrity Research’s analysis, the global market for policy research and political intelligence services generated an estimated $402 mln in revenue in 2009. This is comprised of the following:

Between 40 to 50 independent research firms generated approximately $120 million in sales of monetary and legislative policy research in 2009.

Between 30 to 50 law firms, lobbyists, strategic consulting firms, and accounting firms also supported ancillary advisory practices for buy-side investors. We estimate that this segment generated slightly more than $36 million in revenue in 2009.

In addition, hundreds of broker-dealers or investment banks produce central bank and legislative policy research for their clients. Integrity estimates that approximately 1.5% of the total research revenues generated by investment banks should be allocated to this type of research. This would represent $246 million in equity commissions globally from institutional customers for policy research and political intelligence services.

While the number of independent firms that produce this type of research grew moderately from the 1970′s, growth in this segment has accelerated by almost 160% since 2000.

The first thing to note is that all of these numbers are generated by an Integrity Research black box, and there’s no particular reason to trust them, given that Integrity Research has every incentive to exaggerate them. The second thing to note is that the number of research shops isn’t growing, which means that any growth numbers have to be based on estimates of what total revenues were in 2000. Those estimates are unlikely to be particularly accurate.

But most importantly, some 61% of the total — $246 million — comes from what Integrity Research hilariously calls “total research revenues generated by investment banks”. Now I’m sure that Michael Mayhew isn’t a complete idiot, so he knows that investment banks’ research arms are loss centers, not profit centers. In fact, they don’t have any revenues at all. What he’s actually looking at is a completely different number: banks’ “equity commissions globally from institutional customers”. And then he’s saying that 1.5% of those institutional-customer equity commissions are attributable to the “central bank and legislative policy research” the banks put out.

This is just laughable. The commissions are paid for trades, not for policy research; no one thinks that a sell-side research note on the new Bank of England governor, say, is really worth any money at all. It’s just part of the service that banks provide their institutional clients.

If you strip out the fictional $246 million, and then apply a few grains of salt to Mayhew’s other numbers, the WSJ’s $400 million starts looking more like $100 million — spread between “40 to 50 independent research firms” and “30 to 50 law firms, lobbyists, strategic consulting firms, and accounting firms”. (The vagueness of those ranges is also worrying: how can Integrity Research estimate total revenues if it doesn’t even know how many political-intelligence shops there are to start with?)

Washington, pretty much by definition, is full of Washington insiders. Many of those insiders look at hedge funds’ budgets and see a road to huge riches. But I don’t see much evidence of that here: if the typical political-intelligence shop has more than two or three employees, they’re not making much in the way of profit. And it’s far from clear that their clients are actually making money from them, either.

Gary Sernovitz, a research analyst turned novelist, has 3,500 words in n+1 about Stevie Cohen, trading, and art collecting. That’s about 3,000 words too many: his core thesis is really pretty simple. Cohen’s art collecting, says Sernovitz, holds up a mirror to his professional life: both are about the “struggle against the mortality of the edge”.

The idea here is that contemporary artists and stock-market traders — both of which Cohen collects — are similarly searching for the “edge”: that original and unique thing which sets them apart from everybody else. And if you look at Cohen’s art collection, it’s long on pieces from radical artists’ “incandescent years” — the years when they were doing something shockingly new. That’s what Cohen looks for in art, and it’s what Cohen looks for in traders, too: not people doing the same thing as everybody else in a slightly better way, but people who aspire to doing something that no one else is even attempting.

The “edge”, in art and in trading, never lasts long, and Cohen is himself exceptional in that regard: he’s been generating alpha for much longer than most traders ever can. But crucially he has done that by collecting: he himself is no Picasso, reinventing himself in one genius new incarnation after another. Rather, he finds the people who have that edge right now, he hires them, and then, when they lose their edge, he’s ruthless about firing them.

When Cohen looks around his trading floor, then, he sees the same thing that he sees when he surveys his art collection: a group of extremely talented and mostly quite young men, at the peak of their powers, engaged in a doomed and heroic struggle against their own inevitable decline, which will coincide with somebody else’s rise.

I like this idea, although I have no idea whether it’s true or not; I can certainly see how it would appeal to a novelist. Cohen, in this telling, becomes a latter-day Dorian Gray — only in this case his pictures, which reflect the way he seeks to dominate the world by collecting exceptional talent, are on full public view.

Naturally, if this were a novel, it would have a tragic ending: Cohen’s hubris would lead inexorably to nemesis. But real life is not always that tidy. Cohen might be facing unusually large redemptions right now, but he’s already made his billions; his wealth is liquid, and he’s not going to let a few insider-trading investigations damage his legacy as an art collector.

A lot of art-world observers are not-so-secretly hoping that Cohen will get his comeuppance and be forced to sell a large chunk of his collection. But it’s not going to happen. Cohen’s a master collector: he’ll sell only if and when he wants to. And given that he’ll never need the money, it’s hard to see why he’d ever feel so inclined.

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Tomorrow, the world’s second-largest economy will release its economic growth figures. China’s growth, as Keith Bradsher writes, is expected to pick up again, for the first time in seven quarters.

The consensus says that China’s fourth quarter growth will come in at 7.8%, lower than the government’s targets of 8%. But even at a growth rate that’s more than double America’s, the world’s Very Serious People believe this is a precarious moment in China. Both Ian Bremmer and Nouriel Roubini list China as one of their top risks for 2013.

China is in the middle of one of the biggest Keynesian economic experiments in history. Last fall, after spending roughly $580 billion in post-crisis stimulus, China tried to bring its economy back to life with $156 billion more for the kind of roads, bridges and trains that Keynesians love. It’s also spending $250 billion a year, the NYT writes, to produce “college graduates in numbers the world has never seen before”.

While China is applying Keynesian solutions to its current problems, however, Tyler Cowen says China’s problem are more of the Hayekian variety. What Hayek called malinvestment — things like disastrously-constructed high-speed rail, bridges to nowhere and ghost towns — seems to be helping China’s political elite to become increasingly rich. All that stimulus, the argument goes, could lead to a bubble-ridden, half-finished wasteland.

A few other problems with China’s focus on government-driven growth. Besides the usual inflation worries, China, Nick Edwards writes, has one of “the world’s widest rich-poor gaps”, which threatens the country’s stability. To Peter Orszag, this is is particularly worrisome: researchers have found that no other country has made “the transition from middle to high income with high levels of inequality”. Though there’s some disagreement on whether China’s income inequality is improving or “dangerously high”, we still don’t have official data, nor will we get it in tomorrow’s promised figures. China’s government hasn’t released official income inequality statistics since 2000. — Ryan McCarthy

On to today’s links:

Alpha
On the trail of SAC’s alleged “black edge” in its trades – Businessweek

TBTF
We’ve made Too Big to Fail approximately 3 times worse – Andy Haldane
Spending billions of dollars on mortgage settlements fails to boost Bank of America’s earnings – Reuters
Citi spent $1.3 billion on settlements and legal expenses in the fourth quarter - NYT

Explained
Markets step in from stage left and have a McLuhan moment with DC - Neil Irwin

Anti-Goldbuggery
“The S&P has beaten gold over every 30-year period of history, ever” – Noah Smith

Oxpeckers
“These constructions acknowledge a truth: our actions are increasingly passive online” – Choire Sicha
How Pete Peterson captured the mainstream media – Remapping Debate

Wonks
“Even the driest definitions of human social development will inevitably carry a strong whiff of ideology” – Jay Ulfeder

New Normal
Running away to join the circus no longer a path to job security – LAT

Correlation
Party identification and gun ownership – Nate Silver

Listicles
“Genuine apocalyptic events” and 149 other things that scare smart people – Motherboard

Video
Extreme pogo sticking exists, and it’s rad – Devour

Facebook
Facebook is launching free calling for US iPhone users – WSJ

The Fed
Are you there, Ben Bernanke? It’s me, Matt – Not Graphs

Things We Are Not Linking To 
Wearing plaid = liberals embracing gun culture. BuzzFeed’s fake trend story