Felix Salmon

Bloomberg’s news reporters still haven’t worked out how to link to external websites, even the US Treasury: they say that “Geithner’s appointments calendar, updated through August on Treasury’s website,” shows an off-the-record meeting with Jon Stewart, but they don’t link to it.

That’s sad, because finding the link is non-trivial. First, you go to the Treasury homepage. Then you ignore all of the links and navigation, and go straight down to the footer at the very bottom of the page, where there’s a link saying FOIA. Click on that, and then on the link saying Electronic Reading Room. Once you’re there, you want Other Records. Where, finally, you can see Secretary Geithner’s Calendar April – August 2010.

Be careful clicking on that last link, because it’s a 31.5 MB file, comprising Geithner’s scanned diary. Search for “Stewart” and you won’t find anything, because what we’re looking at is just a picture of his name as it’s printed out on a piece of paper.

In other words, these diaries, posted for transparency, are about as opaque as it can get. Finding the file is very hard, and then once you’ve found it, it’s even harder to, say, count up the number of phone calls between Geithner and Rahm Emanuel. You can’t just search for Rahm’s name; you have to go through each of the 52 pages yourself, counting every appearance manually.

Is this really how Obama’s web-savvy administration wants to behave? The Treasury website is still functionally identical to the dreadful one we had under Bush, and we’ve passed the midterm elections already. I realize that Treasury’s had a lot on its plate these past two years, but much more transparent and usable website is long overdue.

Update: Tom Lee explains that the horrid format of the calendar might well be a function of the fact that there still isn’t decent electronic redaction technology.

Update 2: ProPublica puts up the calendar in searchable form! Rahm appears on 49 of the 52 pages.

Mark Thoma sends me a very clear explanation of the economics of paywalls from Kellogg’s Shane Greenstein:

Two fundamentally different models have competed in information markets.

In one model, an information provider formats the presentation of information, selling advertising space to another party. These sites want search engines to find them. This model involves little gatekeeping of the user. Much of the open commercial Web operates this way.

In the other model, an information provider sells passwords to users…

Vendors can charge serious subscription fees for password when the information is unique enough that users are not tempted to go to the free advertising-supported alternatives…

The Wall Street Journal has had a bit of success providing unique coverage of financial matters… Similarly, many sports teams have started gatekeeping for deep coverage of team matters…

In most other news markets, in contrast, gatekeeping had a hard time surviving because it was not valuable. This outcome should be blamed on competition between many news outlets with similar material. If one vendor tried to restrict access with gatekeeping activity, another vendor could offer the same information for free, thereby attracting another eyeball for their advertisers. Users tended to go to the latter, undercutting the former.

This outcome arose because the cost of sending files to one more reader is nearly zero, which makes it tempting for competitors to charge nothing and sell advertising. If that attracts large numbers of users from the gatekeeping site, it renders any gatekeeping strategy unprofitable.

There’s a couple of important things to add to this analysis, I think. Firstly, there isn’t some lumpen mass of “users” who are in search of information and go to where they find the most value. Every major newspaper in the world has vastly more readers today than when the only way of reading it was to pick up a physical copy. And the daily readership of an inside-the-beltway publication like Politico dwarfs the print circulation of the largest newspapers in the world — Bild, or The Sun, or USA Today.

When online publications go free, they’re not just competing for users; they’re creating new readers in a way that pay sites have enormous difficulty doing. That’s one of my big problems with paywalls: even if they’re the most effective way of monetizing existing readers, there’s an enormous opportunity cost of implementing them, in terms of the new readers who will in future never read the site because they’re put off by the paywall.

Sites with paywalls understand this, of course, which is why they make selected content free, or allow readers some quota of free articles before they reach the wall. But there is always a downside: such approaches require registration, which many people find too burdensome; and they also mean that the site develops a reputation as somewhere to be avoided unless there’s an article you really want to read. Certainly it becomes very difficult to search such sites for specific information.

More generally, Greenstein sees the economics of content as a competition between providers, where the lowest-cost providers win. But he misses something, I think. It’s not just that readers don’t see the value in paying for content when something “similar” can be found elsewhere. It’s also that there is positive extra value in reading free content, since it becomes much easier to share that content via email or blogs or Facebook or Twitter, you don’t need to worry about following links or running into paywalls, and in general you know that the site will play well with others on the open web.

The point here is that giving away content for free doesn’t have to be a regrettable necessity; it can actually be an exciting way of maximizing the value of your content.

And meanwhile, the richness of the web does not mean that news sites, say, are competing mainly with each other. If Newsday puts up a paywall and it fails, is that because readers can find content similar to Newsday’s elsewhere for free? Yes, in part. But it’s also because the people who would otherwise visit Newsday.com have lots of other things they also like to do. They like to spend time in Farmville, or they want to watch a video of a dog skateboarding, or they want to see their house on Google Earth, or they want to go walk their dog. These aren’t people who need certain information and are going to seek it out at the lowest cost; they’re just people who would visit Newsday’s website if it was free, but won’t if it isn’t.

That’s why gateways and paywalls are such problematic things, online: they’re a bit like that crappy VIP room in the back of the nightclub which is much less pleasant than the big main space. You might wander in there from time to time if it’s free, but if you need to buy an expensive bottle of Champagne to do so, forget it. There’s lots of other stuff to do, both online and off. And so the walled-off areas of the internet simply get ignored.

Bloomberg not only should know better; it does know better. And it says as much, in paragraph 21 of its story. But that doesn’t stop it from leading the story with this:

The world’s biggest bank isn’t in the U.S., where regulators banned lenders from proprietary trading, nor in Switzerland, which is doubling capital requirements. BNP Paribas SA is in France, which is doing neither.

BNP Paribas’s assets rose 34 percent in the three years through June, reaching 2.24 trillion euros ($3.2 trillion), equal to the size of Bank of America Corp., the largest U.S. bank, and Morgan Stanley combined.

At the end of the piece, there’s even a league table of what Bloomberg calls “the world’s 15 biggest banks by assets”, with BNP Paribas in first place and BofA in 5th.

But here’s that 21st paragraph, which pretty much entirely negates the entire premise of the story:

European and U.S. banks use different accounting standards, making a direct comparison of their size difficult. In particular, U.S. generally accepted accounting principles net out the banks’ derivatives positions, unlike the international financial reporting standards used in Europe. This results in higher reported assets under IFRS. The comparison also excludes assets held by banks off their balance sheets.

And here’s a chart, via Alea, showing that Deutsche Bank’s assets, as of end-2008, were more than twice as high under European rules as they were under US rules:

Basically, it all comes down to those derivatives books: in the chart above, Deutsche Bank’s derivatives assets alone, at €1.2 billion trillion, are significantly larger than its total size under US GAAP.

I’m quite sure that if JP Morgan had to report its assets under IFRS, it would be significantly larger than BNP Paribas. And I’m pretty sure that if anybody at Bloomberg stopped to think about it, they would come to exactly the same conclusion. So why on earth are they running headlines saying that “BNP Paribas Grows to World’s No. 1 Bank”? Anybody?

My review of Matt Taibbi’s new book is up at Bookforum; I enjoyed it a lot, and even learned from it. Meanwhile, Justin’s fair take on Gretchen Morgenson received a lot of pushback in the comments, much of which was unhelpfully ad hominem. (No, Justin is not a sexist misogynist, and criticizing Morgenson doesn’t make him one.)

I actually stand by my March 2007 criticism of Morgenson, in which I said that she didn’t provide any evidence of a looming crisis in the mortgage market. Certainly, with hindsight, I was too bullish back then, but so was Morgenson, whose prognostication was far from being remotely apocalyptic:

Fewer lenders means many potential homebuyers will find it more difficult to get credit, while hundreds of thousands of homes will go up for sale as borrowers default, further swamping a stalled market…

If home prices do not appreciate or if they fall, defaults will rise, and pension funds and others that embraced the mortgage securities market will have to record losses. And they will likely retreat from the market, analysts said, affecting consumers and the overall economy.

I was covering the housing market a fair amount back then, and indeed linked to an earlier post in which I spoke at length to one of Morgenson’s favorite sources, Josh Rosner, and said that “there are lots of reasons to be worried about the future of the mortgage market”. My issue with Morgenson was simply that her arguments didn’t make any sense, and that often her facts were simply incorrect.

If you wanted good reasons to be worried about the mortgage market in early 2007, you went to Rosner, or to Calculated Risk, or to Nouriel Roubini. If you wanted bad reasons to be worried about the mortgage market, you went to Morgenson. Yet still she asks for and gets lots of credit for her columns back then, simply by dint of her prominent perch at the NYT. If she was the blogger and Tanta had the NYT column, no one would have paid any attention to Morgenson at all.

That can’t be said of Taibbi, whose fierce and excoriating journalism for Rolling Stone has performed a very important function: it helped to get people angry, and to really care about issues which can become incredibly dry and boring very quickly.

What’s more, Taibbi’s stuff is fact-checked in a way that Morgenson’s isn’t. He doesn’t make the enormous howlers that Morgenson does, partly because he cares more about the nitty-gritty of this stuff, partly because he spends much more time on each piece, and partly because the RS lead times allow him lots of editorial support.

I can highly recommend that readers of this blog read two chapters in particular in Taibbi’s book: the one on Greenspan, and the one on AIG. The former is the most comprehensive take-down of the Maestro you’ll ever see; I’d be especially interested to see Brad DeLong’s take on Taibbi’s shrillness. And the AIG chapter, which concentrates on the securities-lending operation rather than on AIG Financial Products, actually breaks news about just how incompetent and stupid AIG was, particularly its securities-lending head Win Neuger.

Justin’s point was that if you ignore the detail in Morgenson’s pieces, the big picture is often correct. Taibbi is pretty much the other way around: the detail is fact-checked and correct, but he massively over-eggs the big picture. (Goldman Sachs did not singlehandedly engineer every financial bubble in living memory; Alan Greenspan is not “The Biggest Asshole in the Universe”.)

It’s easy, however, to read Taibbi and even to enjoy the hyperbole without taking it at face value. It’s much harder to separate the useful from the contentious with Morgenson. Which is why I think she’d benefit greatly from much more active, hands-on editing. The question is: who at the NYT has the time, the desire, and the ability to do that?

Dean Starkman has the official statement and Laura McGann has the embarrassingly verbatim Q&A: I’m the new CJR Peterson Fellow, which means that I’m going to be blogging more about macro and fiscal stuff, and especially the press coverage thereof.

If you read this blog, or its RSS feed, that’s great — everything I write as the CJR Peterson Fellow will also appear here. This just means that some of my stuff will also appear at CJR; it should also help prod me to write a bit more about the economy broadly, and the media coverage thereof — the beat I started on as a professional blogger for Nouriel Roubini in September 2006.

I need your help for this: I don’t want to just write lots of posts about how good David Leonhardt and Greg Ip are. And I’m interpreting “media” very broadly, to include everything from blog entries to CBO reports. So if there’s anything you stumble upon which falls under the general heading of fiscal/macro and which you think is particularly noteworthy, either for being good or for being bad, let me know. Send me an email, put it in a tweet with @felixsalmon in there somewhere, leave me a comment on this blog — the more stuff I get to see, the better this project will be. Feel free to shill for yourself if you’re so inclined.

And no, as I told Laura, this does not mean I share Pete Peterson’s views on the deficit and the national debt. In fact, I’m still agnostic on that question, and am looking forward to reading good pieces illuminating the debate. And slamming the lazy ones, too, of course.

There’s lots of schadenfreude at the expense of News Corp today, which finally released numbers on its UK paywalls. Mathew Ingram, for instance, reckons the numbers prove that the paywalls are a bust, while Ian Burrell surveys other media machers and finds lots of downward-pointing thumbs.

Certainly traffic has fallen off a cliff, from 21 million to 2.7 million pageviews per month. And while News International is trumpeting “more than 105,000 paid-for customer sales to date”, everybody suspects that most of those are one-off £1 purchases to get a 30-day free trial. (News has also bundled in the papers’ iPad and Kindle editions, just to make the totals even more opaque.)

With those modest numbers, there’s certainly no way that News will get any noticeable ad revenues: media buyers simply have no interest in reaching such a small audience, no matter how much information News has on exactly who they are. And certainly, as Ingram says, “the newspapers have been cut off from the news flow on the broader Internet, and the potential benefits of attracting links and commentary from other sites that could help to promote their content”.

But to get the bigger picture of what’s going on, it’s worth looking at the papers’ print circulation. The Times sold just 486,868 copies a day in September, down 15% year-on-year, while the Sunday Times is down 10% year-on-year to a circulation of 1,091,869.

Faced with that kind of circulation decline, it’s easy for newspaper people to declare that it’s not their fault, and that the problem is that readers can find all their content for free online, so why would they ever want to pay for it. The paywall then becomes a last-ditch attempt to shore up print circulation, to stop the perceived bleeding of readers from print to the web.

The NYT paywall is clearly being constructed along similar lines: as a way of preserving print circulation, rather than a means of generating extra revenue.

But the empirical evidence doesn’t support the thesis that print circulation is dropping because print subscribers are happily just reading the paper online.

I don’t know how many readers the Times and the Sunday Times have between them, but it’s certainly higher than the circulation of the Sunday Times alone, which is 1.1 million. Of those readers, fewer than 10% — just 100,000 — have bothered to activate the digital access that comes with the paper. Most of the papers’ readers are clearly not even reading the websites when they’re free.

Meanwhile, a new report from Jim Chisholm demonstrates that there is no correlation at all between print circulation declines and online readership. The Daily Mail, for instance, is booming on both the website and the print-circulation fronts.

The fact is that insofar as printed newspapers compete with the web, they compete with everything on the web, not just their own sites. No general-interest publication can prevent its print circulation from declining simply by walling itself off from the web. Which is why the NYT paywall is so silly: millions of dollars in development costs, and enormous amounts of important management time, devoted to something which will probably end up grossing no more than $20 million or so a year. That compares to $78.3 million in internet advertising revenues in the last quarter alone.

Rupert Murdoch has a philosophical aversion to free content, and that aversion is costing him dearly when it comes to the value of his UK franchises. The NYT has to be very careful that it doesn’t make the same mistake.

Cullen Roche today revisits his advice from a year ago, which was published in New York Magazine, on how to buy toxic assets. He says that he “received a pretty substantial backlash from the article”, which is true: I wrote about it under the headline “Awful investing advice of the day, distressed-mortgages edition”. But now he’s defending himself:

First of all, I wasn’t making, nor do I ever make recommendations for anyone. That should be ABUNDANTLY clear to any and all readers of everything I write. I was simply brainstorming about the ways that small investors could gain access to toxic assets because it’s a relatively closed space to the small investor if you don’t have certain connections…

Even though these ideas were generated well after the market bottom the one year results prove that we were indeed in the midst of a once in a lifetime opportunity…

Unfortunately, the once in a lifetime opportunity is likely gone as the risk/reward environment has altered dramatically… In fact, distressed debt looks more crowded by the minute.

So does that mean, pace Joe Weisenthal, that I’ve been proven wrong?

No.

Firstly, of course Roche was making investment recommendations — he was citing specific ticker symbols, ferchrissakes, and the first line of the piece (headlined “The Beginner’s Guide to Toxic Assets”) was this:

So how can you consider joining Michael Osinski and invest in toxic assets?

The entire piece, in other words, was presented as a way to give those “beginners” a “guide” for how to “invest in toxic assets”. You can reiterate until you’re blue in the face that you’re not giving investment recommendations, but a guide like this — especially if it comes with ticker symbols — is exactly that.

Secondly, the one year results are not particularly convincing. Roche’s own numbers say that his recommendations went up by 21% on average, compared to a rise of 11.45 percent in the S&P 500. But the 21 percent return figure doesn’t include transaction costs, and it certainly doesn’t make any attempt to account for the the fact that these stocks are inherently riskier than a big index of the largest companies in America.

Does the excess 955bp of return make up for that risk? Maybe it does — but it would be nice if Roche had told us in advance what kind of outperformance would constitute proof that his “once in a lifetime opportunity” thesis was true. Personally, I would expect that a once-in-a-lifetime opportunity would generate rather more than 955bp in excess returns, but maybe that’s just me.

Finally, and most importantly, the initial story didn’t give any kind of exit strategy. I’ll give Roche some small credit for posting exit advice on his blog today. But 99% of the people who read his original article on nymag.com will never see that blog post. And so if you took his advice a year ago, right now you’re just sitting on paper profits. And there’s no indication at all, in his original article, that you should sell after one year, or sell when the portfolio has risen by 20 percent, or even sell at all, really.

Every article saying that now’s a good time to buy X should be ignored automatically if it doesn’t say when you’re meant to exit that trade. (“Never” is a reasonable answer to that question, but if you’re giving buy-and-hold-forever advice, be explicit about that.) Given that NY Mag is unlikely to run a piece saying “hey, those stocks we recommended, now would be a good time to sell them”, it should never have run the article saying that it was a good time to buy them a year ago.

But hey, if someone at NY Mag is reading this, maybe a little blog entry might be in order. It can’t hurt, and it might save a few readers from following these stocks down after riding them up.

Remember the WSJ front-page headline saying “SEC Blasted on Goldman“? It was based on a few comments from the SEC inspector general, David Kotz, who has now released his official report on Goldman. And there ain’t no blasting here:

The OIG investigation did not find that the SEC’s investigation of, or its action against, Goldman was intended to influence, or was influenced by, financial regulatory reform legislation. The OIG found that the investigation’s procedural path and timing was governed primarily by decisions relating to the case itself, as well as concern about facts about the investigation’s subject matter being publicized prior to the SEC filing an action and concerns about press coverage and maintaining a relationship with the NY AG.

The OIG also did not find that the settlement between the SEC and Goldman was intended to influence, or was influenced by, financial regulatory reform legislation. The settlement’s timing was driven primarily by factors relating to the civil action against Goldman and Goldman’s quarterly earnings release.

The OIG did not find that anyone at the SEC shared information about its Goldman investigation with any journalists or members of the media prior to the filing of its action against Goldman on April 16, 2010.

In fact, pretty much the only negative thing that the OIG did find was that the SEC, according to its own rules, should have given Goldman a heads-up before announcing the suit. As a result, the OIG recommends that the SEC… take another look at those rules.

The report isn’t wholly believable. Of course the New York Times had a heads-up about the case: you can’t read a complaint, write a long, detailed story about it and publish that story, all within five minutes of the SEC press release going out. But then again, the OIG somehow wasn’t able to get his hands on that story:

The New York Times Company represented that it was unable to retrieve the version of its article about the SEC’s action against Goldman as it was first published at 10:38 a.m. As a result, the level of detail concerning the SEC’s action contained in this first iteration of the article could not be reviewed by the OIG.

Well, you can see the final version of the story here; it doesn’t differ substantially from the story as first published and it’s over 1,700 words long. It clearly wasn’t written in five minutes.

I’m also unsure how much of this to take at face value:

Chairman Schapiro testified that she was “quite surprised” at how much media coverage the Goldman action received… Cohen testified that he and others at the SEC were surprised at the attention given to the Goldman case once it was announced… Many other witnesses in this investigation testified that they were surprised or “shocked” at the extent of the media attention given to the Goldman action.

Certainly there was a lot of press coverage given to the case and Goldman’s share price went down more than I think anybody at the SEC or even Goldman would have expected. In hindsight, it’s easy to see why the case got so much attention, but at the same time I can maybe believe that the SEC didn’t anticipate the full extent of the media firestorm. (Here’s one datapoint: it’s the only occasion I’ve been asked to write an op-ed for the Washington Post.)

But all those are quibbles. The OIG report is clear and it’s a full exoneration of the SEC both in terms of whether the case was political from the start and even in terms of whether its timing was political. Kotz concludes in both cases that it wasn’t. I’ll be fascinated to see how much prominence the WSJ gives this story.

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!

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.

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.

Bloomberg CEO Dan Doctoroff wants to become a fully-fledged media mogul, not just in the hermetic space of financial terminals, but in consumer-facing media too. He tells Keith Kelly that the more inescapable Bloomberg’s media properties are, the better the terminals will do:

Said Doctoroff, “We want to gain a greater audience for Bloomberg News, which translates into greater influence, which translates into more market-moving news, which enables us to sell more terminals.”

Ryan Chittum is not convinced:

Hard to see how you’re going to use news to sell more $20,000 a year terminals if you’re dumping more of the same news on your Web sites for free.

I’m with Doctoroff on this one. The more ubiquitous Bloomberg’s news, the more terminals it will sell. The bigger and the better-known you are, the more quickly you’ll get your calls returned and the more exclusive access to newsmakers you will receive. In turn, that improves the quality of your news product, and the willingness of financial professionals to pay $20,000 a year for it.

Those professionals really don’t care if the news is on a Bloomberg website or not; as far as the market is concerned, the information is public as soon as it hits the terminal in any case. The competition for Bloomberg terminals is other terminals, not the web. And insofar as the web provides any competition at all, it’s the web as a whole which does so, not that tiny little corner of the web which is published by Bloomberg. The web is simply too big: no matter how much beefed-up Bloomberg content is “dumped” onto it, that’s never going to suddenly make it a much more attractive alternative to a purpose-built news and information terminal designed very specifically for financial professionals.

Instead, the web will give Bloomberg valuable visibility among the kind of people who will never use a terminal of any description, including large swathes of Washington as well as important people in the non-profit area, or the education sector, or any number of other important yet non-financial industries. And the more that they see and respect the brand, the more likely they are to become valuable sources for exactly the stories that traders with terminals want to see.

The point is that Bloomberg can profit from an asymmetry: if a Capitol Hill staffer reads B Gov a lot, she’ll be more likely to talk to the Bloomberg commodities reporter calling from New York or Sao Paulo. Which is why Doctoroff’s strategy makes sense, and Chittum’s skepticism is misplaced.