Felix Salmon

Word clouds done right

Jacob Harris is absolutely right to hate word clouds. You take a long and complex text, and then you boil it down to a group of individual words, with the most-used words being the biggest? That’s just silly. “Reporters sidestepping their limited knowledge of the subject material by peering for patterns in a word cloud,” he says, is “like reading tea leaves at the bottom of a cup”. Word clouds are crude, inaccurate, misapplied, and place the onus of understanding onto the reader.

Chart of the day, Euro bailout edition

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This, ladies and gentlemen, is how the sausage gets made — it’s yesterday’s eurozone rescue plan, as presented by an unidentified adviser to one of the European Union governments involved in the negotiations.

Market inefficiency of the day, Irish bank edition

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You won’t be surprised to hear that shareholders in Allied Irish Banks have not done very well for themselves in the past five years. It did go bust, after all, and had to be nationalized; the share-price chart is above. But recently, as part of the recapitalization of the bank, the number of shares outstanding rose dramatically. Here’s the announcement, which doesn’t quite spell things out:

Corporate governance chart of the day, Benford’s Law edition

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This chart was put together by Jialan Wang, and it shows the degree to which companies’ reported assets and revenues deviate from a Benford’s Law prediction over time. (If you want some good background on Benford’s Law and how it can uncover dodgy numbers from eg the Greek government, Tim Harford had a great column last month on the subject.)

Chart of the day, median income edition

Why has no one thought to do this before? Every month, the Current Population Survey goes out to a nationally representative sample of more than 50,000 interviewed households and their members. And in one of the questions, those households — or at least the households who didn’t answer the same question the previous month — are asked how much money they made, in total, over the past 12 months. That question has now been asked in 138 successive months, since January 2000. Which means that with a bit of clever analysis, it’s possible to put together an apples-to-apples comparison of what has happened to household income every month.

Chart of the day, Apple price edition

Many thanks to the wonderful Silvio DaSilva for putting this chart together; I think it explains a lot of what happened with Apple over the years.

A topological mapping of explanations and policy solutions to our weak economy

This was originally posted at Rortybomb

For the next few posts I need to allude to an ongoing battle of ideas about what is troubling our economy and what solutions are available. I figured it might be a good idea to try and create some sort of topological map of the various clustering of ideas and policies that constitute these arguments as well as the overlap among them. This is a preliminary version of this map: I’d really appreciate your input about what is missing and how to make this better.

Charts of the day, CBO testimony edition

Two charts jump out at me from Doug Elmendorf’s presentation to the Joint Select Committee on Deficit Reduction. The first is the sheer size of various loopholes in the tax code:

Charts of the day, Swiss franc edition

As a general rule, it’s the risk-on trades which have a tendency to blow up in your face. If you borrow in a low-yielding safe currency and invest in a higher-yielding risky currency, you make money every day, but can lose it all — and then some — with one violent currency move, when the risky currency suddenly weakens.