Flying today, and guaranteed to be sleep deprived, so if you want to help, send good links. Thanks!
Kindle Economics ZDNet
Blankfein, Deputies Forgo Bonus as Goldman `Can’t Ignore’ Woes Bloomberg. No bonus for the top guys is the right gesture. but what about all the other Goldman managing directors? A conflicting sign of the times: Most College Presidents’ Pay Climbing Wall Street Journal
Stores Count Seconds to Trim Labor Costs Wall Street Journal. Now retail jobs are being treated like factory jobs of old, where time and motion studies are more than a century old.
Sum of the parts Financial Times. A good piece on supply chains, and asks whether manufacturers have pushed their suppliers too hard for cost cuts.
Credit insurers face huge rise in premiums Independent
Russia’s banal reality lies in between energy superpower and bankrupt state Ambrose Evans-Pritchard. Telegraph
Yellow Pages Buyout Bust Paul Kedrosky, I remember how possible buyers salivated over those cashflows.
Regulatory Filings Reveal Massive Selling in Hedgistan 1440 Wall Street
Crazy markets, the historical perspective FT Alphaville
Antidote du jour:
les antidotes du jour, while lovely, no longer suffice.
i’m with ritholtz, only a big freshly rolled fattie does the trick.
all kidding aside, thanks, yves, for all of your hard work.
Trahimur omnes laudis studio
Pretty sleep deprived right now too. So no good links forthcoming for a while. But when the do come, watch out… doozies (appropriate for gilded age, doozies).
Regarding Kindle and ebooks, I regard them as an expensive ripoff for reasons not mentioned in the article on the economics of Kindle.
Properly speaking, you don’t own the book you purchase for Kindle. You are merely purchasing the right to read it. For example, you cannot loan the book to someone else to read on their Kindle. You could not transfer your books to another ebook reader made by another vendor should you want to do so. Then there’s the question of what happens when your Kindle starts to wear out and you purchase a new one. Is there a way to transfer your books to that new Kindle? I don’t know, but I doubt it since you’re not permitted to transfer copies to someone else’s Kindle.
One nasty and unfortunate result of this is that, if ebook readers became pervasive enough so that books became obsolete or prohibitively expensive, public libraries would go the way of the dinosaur and it would be impossible to read a book without purchasing an ebook copy.
Another fact is that the cost of Kindle ebooks is very high, even absent the limitations I mentioned above. I don’t know what the exact percentage, but the largest part of the cost of publishing a book is in the production of the physical object. Paper has to be purchased. It has to be printed and bound. Those costs go away for an ebook, yet that isn’t reflected in the cost of ebooks. They’re way too expensive.
WSJ -“Stable Money Is the Key to Recovery”
Re: “College Presidents’ Pay”, my observation is that universities firmly believe that they have “decoupled” from the rest of the economy and will be immune to this downturn. I am, of course, firmly convinced that they are about as “decoupled” as China or Iceland, and that the impact of the economic crisis will hit them head-on at some point. The sharp reductions in state budgets, a pullback of private lenders from the student loan market, a dropoff in alumni donations, and certainly not least of all crashing endowments will take a big hit out of university finances, and they will be faced with a painful choice of sharply raising tuition–and driving students away in the process–or reducing expenses, including outsized compensation packages and oversized construction projects.
fantastic chart showing “major DOW corrections – largest first year percentage drops”.
hint: 1929 is no longer in first place. link:
Everything going as planned:
“A senior Republican senator is seeking an investigation into potential conflicts of interest “
Let’s see if we can understand this story from the FT. First, here’s my post about the problems with TARP:
“Saturday, October 4, 2008
Problems With The Bailout
From the NY Times article “For Treasury Dept., Now Comes Hard Part of Bailout”, I see the following problems with the plan as envisaged:
1) Possible conflicts of interest with the administrators of the plan.
2) Overpaying for assets.
3) Doesn’t do enough to ease credit markets or makes it worse.
4) When the assets are eventually sold, there is a huge and unanticipated loss.
5) Lobbying by hedge funds, etc.
Are there others? “
See Problem 1:
Also, read my post here about William Gross, who’s my guy, and I still thought there could be problems.
Now, from the FT:
“A senior Republican senator is seeking an investigation into potential conflicts of interest among former Goldman Sachs executives serving at the US Treasury and whether any officials exceeded their authority by implementing a controversial tax change without the approval of Congress.
Chuck Grassley, the most senior Republican on the Senate finance committee, asked Eric Thorson, inspector-general of the Treasury, to investigate the “independence” of several Treasury officials who formerly worked at Goldman Sachs and serve as advisers to Treasury secretary Hank Paulson, the former chief executive of the Wall Street bank.
Mr Grassley said in a letter to Mr Thorson that there was reason to be concerned that “relationships” between the officials and board members at two merging banks, Wells Fargo and Wachovia, gave the “appearance of preferential treatment”.
Good work Sen. Grassley. You’re right on the ball.
“Mr Grassley singled out Robert Steel, a former Goldman official who worked under Mr Paulson at the Treasury before he became chief executive of Wachovia.
Mr Grassley is specifically concerned with a change in the tax code the Treasury initiated in late September that saved some institutions tens of billions of dollars and paved the way for Wells Fargo’s acquisition of Wachovia.
Citigroup was at the time also bidding for Wachovia, but was ultimately trumped by Wells Fargo, in part because it would not have received any benefit from the tax change because of its losses.
The September 30 “notice” by the tax authorities, which fall under Treasury’s jurisdiction, altered a section of the tax code that had previously prevented tax-motivated acquisitions of loss-making corporations. In effect, the notice eradicated a limit on the amount of taxable income an acquiring bank could deduct after a takeover.
It has been estimated that the change could save Wells Fargo nearly $20bn (€15.9bn, £13.6bn).”
If you want to understand this, read my recent post here.
Back to the FT:
“Mr Grassley, who has a reputation for aggressively uncovering and pursuing tax evasion, has a previous working relationship with Mr Thorson, who served as chief investigator for the Senate finance committee and whom Mr Grassley once praised for having “integrity and courage”.
Last week, Mr Paulson defended the code change and said it had been done through an “administrative process” that was “quite legal”. The Treasury secretary said that the previous tax policy was “impractical and unworkable” in the current economic environment.
The Treasury said on Sunday it was reviewing the letter. Wachovia said “to the best of our knowledge” the company was not involved in the tax change. It added that Mr Steel did not have a severance agreement.”
Okay. Good for Grassley. But please, nobody tell me this wasn’t expected. The problem with TARP was that you had to hire people from some of the firms involved in the crisis, and the plan, the way it was constructed, as a hybrid plan, looked arbitrary, and reeked of cronyism. Calling Charles Krauthammer in my recent posts about his article on the Auto Bailout. TARP was pushing consolidation, meaning that it had to look like it was favoring some banks over others. That was one of the problems about letting insolvent banks fail, as Anna Schwartz wanted. It could look like some banks were being saved while others cut loose, and the solvency of the bank could meld into an issue of preferential treatment. Were they really solvent/insolvent?
This was a huge negative with the plan from the beginning, as was the problem of lobbying, which has also been serious.
Don the libertarian Democrat
michael pettis has a long tirade on his blog about the savings glut in china. basically he thinks (i) china and other big net exporters should be pursuing the needed keynsian fiscal stimulus, not the big importers like the usa, (ii) the massive stimulus recently announced by the chinese leadership is “more smoke than fire” as it relies heavily on spending by entities outside central govt that simply cannot afford it, and (iii) there may be a strong incentive for the usa and others to opt for protectionism as his reading of the 1930s is that it was the net exporters (like the usa in those days and china today) that suffered most from the resulting manufacturing glut in their home market.
btw, pettis has moved his blog to a china censor-free url: http://mpettis.com/
Those who didn’t get around last week to reading Michael Lewis’ already-iconic Portfolio cover story “The End,” and even somw who did, might be amused by this riff on what 20 years of this system had wrought. From this writers’ take, it seems like Meredith Whitney and Gordon Gekko are talking to each other.
The range today on 13-WEEK TREASURY Bill was 0.02 – 0.17, with 52 week range between 0.01 – 8.212
Today was a 30.77% drop
What does this mean??
FYI: The U.S. Treasury Department auctioned $27 billion in 13-week bills on Monday.
The auction drew a yield of 0.150%, with 82.3% of bills allotted at this rate. The bid-to-cover ratio for the auction, a statistic that measures demand for the securities, came in at 3.14.
The maturity date for the bills is February 19th, 2009.
Last week, the Treasury’s auction of 13-week bills drew a bid-to-cover ratio of 3.32.
FYI: T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.
For example, let’s say you buy a 13-week T-bill priced at $9,800. Essentially, the U.S. government (and its nearly bulletproof credit rating) writes you an IOU for $10,000 that it agrees to pay back in three months. You will not receive regular payments as you would with a coupon bond, for example. Instead, the appreciation – and, therefore, the value to you – comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period.
Phil Gramm is at it again. It is the fault of ‘predatory borrowers’ that the world’s finances are in a mess says Gramm in this Barry Ritholz story.
‘“Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. My mother lived it as a result of a finance company making a mortgage loan that a bank would not make.”
-former United States senator Phil Gramm.
There is much more in the same vein, if your stomach can take it. Yves wanted links today for she is traveling. That’s my story and I’m sticking to it.
Demand for T-bills remains extreme, demand that reveals extreme uncertainty over the global outlook. Stop-out rates for both the 3-month and 6-month bills, at 0.15 percent and 0.84 percent, are among the lowest since the mid-September crash. Despite very large auction sizes of $27 billion, bid-to-cover ratios were very strong at 3.14 for the 3-month auction and 3.38 for the 6-month.
@Link,stores count seconds to trim labor costs.
Dwight Wald’s “The Administrative State” talks about the roots of efficiency and its role in our society. The question is how much is good for us and how much is bad.
We need to find a balance which allows us to be prosperous with out creating larger down the road social malfunction as the long term cost would be higher than the near term benefit.