Felix Salmon

Annals of ignoble cowardice, Second Circuit edition

September 10, 2013

I spent all of yesterday at a fascinating and wonky conference in London, on the economics and law of sovereign debt. I gave a short talk on the latest developments in Elliott vs Argentina (a/k/a NML vs Argentina), and specifically on the decision which was handed down by the Second Circuit court of appeals on August 23. These are the notes I drew up for the talk.

Fuzzy credit

September 8, 2013

Matt Levine, newly arrived at Bloomberg View, has a very smart response to my post about those weird jumbo mortgage rates. Levine comes up with two reasons why jumbo rates might be lower than the rates on loans which can be sold to Frannie, and both of them are entirely plausible.

Why charitable donations to public schools are OK

September 6, 2013

Rob Reich is worried about school inequality. (Longer, more fun version here.) When it comes to education, as in so many other fields, the rich just get richer, leaving everybody else behind. His Exhibit A: the parents of wealthy Hillsborough, California, who between them donate some $2,300 per child per year — all of it fully tax-deductible — to supplement the money coming from the state. This, says Reich, is not what charitable deductions are for:

Jobs: The summer’s over

September 6, 2013

If you wanted to engineer the strongest possible recovery in the US economy, you would try to create two things. First, and most important, you would want robust jobs growth, with employers adding positions, the unemployed — and especially the long-term unemployed — finding new jobs, and the proportion of Americans with jobs rising steadily. Secondly, you would want to introduce errors into the monthly jobs report. You would try to make jobs growth seem weaker than it really was, and unemployment higher. By doing that, you would keep monetary policy — and market expectations for future monetary policy — as accommodative as possible. That in turn would keep both short-term and long-term rates low, which would provide extra fuel for the recovery.

Why mortgage rates are weird

September 5, 2013

This time last year, Peter Eavis came out with a pair of columns asking the question: why were mortgage rates so high? Back then, the typical 30-year mortgage cost 3.55% — more than 140bp above prevailing mortgage-bond rates. Given that banks normally lend out at only about 75bp above mortgage-bond rates, said Eavis, mortgage rates should by right have been much lower.

When vultures land in the Hamptons

September 5, 2013

Today’s tale of hedge fund / Hamptons excess comes from Mitchell Freedman at Newsday; if that story is paywalled, you can find pickups in all the usual places. But it’s the Daily Mail which has the best map:

Why the internet is perfect for price discrimination

September 3, 2013

Price discrimination is one of those concepts that only an economist could love. But the theory is clear: the more that a vendor can discriminate according to willingness to pay, the more value that vendor can add. Rory Sutherland uses air travel as an example: having a mix of classes allows price-sensitive people to pay low fares, while the rich have a large number of flights to choose from. On top of that, he could have added, airlines are extremely good at exercising price discrimination within classes, so that two people receiving identical service might be thousands of dollars apart in the amount they paid for their tickets.

Chart of the day, Microsoft edition

September 3, 2013

Many thanks to Ben Walsh for pulling together the data for this chart. The numbers speak for themselves, really: over the course of Steve Ballmer’s tenure as Microsoft CEO, the company’s stock price has gone nowhere, its market share has plunged — but its headcount has more than trebled. And that’s before adding another 32,000 employees as part of the Nokia acquisition.

Don’t cry for “the little guy on Wall Street”

September 2, 2013

This happens every time something goes wrong on the stock market — every time there’s a flash crash, or a high-frequency trading firm blows up, or the Nasdaq is forced to go dark for three hours. A bunch of editors who don’t really know anything about HFT ask for stories about it, and they all want the same thing: a tale of how a small group of high-speed trading shops, armed with state-of-the-art computers, are using their artificial information advantage, and their lightning-fast speed, to extract enormous rents from the little guy.