American Express blows me a raspberry
My name has been pronounced many weird ways over the years, but never quite like this:
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Del.icio.usOn Dave Weigel
So I haven't updated felixsalmon.com in forever, and I feel I'm very late to the Dave Weigel party, having spent most of my day doing other things like watching the World Cup and swimming in the Atlantic. So this goes here, rather than at Reuters:
The bien-pensant consensus surrounding l'affaire Weigel is that it's wrong he got kicked out of his position blogging for the Washington Post. And that of course is entirely correct. But even many of the people who are on #teamweigel will quickly add that he demonstrated poor judgment in writing what he wrote, and that this should be a lesson to us all.
I don't think that's true. Our wired and Twittered world is increasingly blurring the distinction between the personal and the professional, and in such a world honesty is a much greater virtue than mealy-mouthed meekness when it comes to expressing the truth as you see it. Especially in a blogger. People have opinions, and it's kinda hilarious to see conservatives try to simultaneously complain that Weigel had erroneously been counted as one of their number while at the same time complaining that he wasn't "objective".
I do believe that Weigel resigned rather than was fired, and it's easy to see why he'd want to do that after reading the absolutely horrendous column by their lame, sad toady of an ombudsman today. Weigel is a great talent, and he'll land somewhere which will be positively encouraging to say in public what he was confined to saying in private while housed at WaPo. He's a very funny guy, and he should be able to let rip as much as he likes, without then feeling the need to apologize for being who he is.
Meanwhile, a horrible little turd somewhere is gleefully if quietly celebrating his coup (I'm sure it's a guy) in leaking Weigel's private correspondence to Fishbowl DC and the Daily Caller. Maybe he's genuinely disturbed in some way. But, to coin a phrase, this would be a vastly better world to live in if he decided to handle his emotional problems more responsibly, and set himself on fire.
Comments (18)Email from experts
I got an email from one Ed Grebeck this morning, complaining about a post of mine on the subject of CDOs. It started like this:
Felix,
I teach "Credit Default Swaps 101" at NYU, a strategist in the global debt markets and an early critic of structured finance and its spillover. Google me.
I published "Why Should Institutions Invest in CDOs, at All ?" In Euromoney in APRIL 2006. See 5 minute video link, done in March 2008.
So I'm surprised that academics at Princeton just now, October 2009, after some $3T + structured finance losses, belatedly argue "[it is not possible to price CDOs...].
As it stands, their work is INCOMPLETE. If it were a thesis, I'd say they failed.
A lot of the email made little sense to me, but there was enough there to pique my interest that I thought I'd look into Mr Grebeck.
As someone who wrote for Euromoney for many years, I have access to their archives: I looked all through the April 2006 issue and couldn't find Grebeck's article at all. Indeed, I searched the Euromoney website for him, and couldn't find it anywhere: he turned up only once, quoted in a column by Edward Chancellor.
As I replied to his email asking him about this, I thought I'd look up his NYU credentials while I was at it. Turns out he's one of two instructors on one course at NYU's School of Continuing and Professional Studies -- the continuing-education arm of NYU, not the university itself.
Meanwhile, I noticed that the "Euromoney article" was part of his email sig, along with that video:
Ed Grebeck is a global debt market strategist and author of "Why...Invest in CDOs, at All?" [Euromoney, April 2006], a prescient warning of Structured Finance illiquidity, conflicts of interest, flawed pricing models and today's trillion dollar losses. http://fiscalclinic.com/2009/12/20/ed-grebeck-shared-with-you-his-video-interview-with-riskcenter.aspx?results=1#SurveyResultsChart
Grebeck replied to my email, attaching the article -- which, I wasn't surprised to find, was never published in Euromoney magazine. Instead, it was a chapter of something called the Structured Credit Products Handbook 2006/07, and it was published complete with Grebeck's photograph, title, email address, and phone number.
I know enough about Euromoney to know how this kind of thing works: they use the power of the Euromoney brand name to sell chapters in these books to anybody willing to write one. Then they try to sell the finished product to the authors, who can try to use their status as a published author to burnish their credentials. None of this has any connection with Euromoney magazine, beyond the parent company.
But what about that article? Was it really prescient? Did it foresee "today's trillion dollar losses"? Was it even called "Why...Invest in CDOs, at All?"
The actual title is "Why should institutions invest in CDOs, at all?", and at heart it's all about relative value: if you're thinking about buying CDOs, says Grebeck, then maybe you'd get better value out of certain other investments instead, which carry less risk or higher returns.
Certainly Grebeck saw that the ratings on CDOs might be suspect, and that the investment banks structuring them were conflicted. But he nowhere talks about trillion-dollar losses, or any possible losses at all. And the main thesis of his article is that if you're thinking of buying a CDO, you'd probably be better off -- wait for it -- buying equity in Ambac instead. Or maybe some other monoline:
Ambac is a relevant CDO comparable because its business model demonstrably works and it, like the other financial guarantors, is really a ‘giant CDO’. Ambac (symbol: ABK) is the best performing monoline financial guaranty insurer, generating a long-term return on equity for investors in excess of 15% per annum – up to May of 2005. Other established guarantors, in business since at least the 1980s, are MBIA (symbol: MBI), FSA and FGIC.
Financial Guarantor portfolios already have the diversification that today's CDOs try to achieve... Their low risk portfolios permit high leverage, some 75 times, at least, their net worth...
Financial guarantors confront the same agency costs that CDO investors face... However, they have at least 300 dedicated staff, each learned in ‘credit culture’, to underwrite, document and monitor the risk over its term and so protect themselves as active market participants.
I really don't think that an April 2006 article extolling the virtues of Ambac and MBIA counts as "prescient". ABK was trading at about $70 back then; today, it's less than a buck a share. MBIA has similarly fallen from $80 to $4. And the losses that did them in are exactly the losses that Grebeck claims to have so presciently foreseen. Yes, investors in CDOs lost a lot of money. But you would hardly have been better off investing in ABK instead.
After reading the article, it was pretty obvious that I wasn't going to place much faith in what Grebeck has to say: he seems to be deliberately misleading when it comes to (a) his own credentials, (b) the place that his article was published, and (c) its contents. But then I realized that if he was emailing me, he was surely emailing lots of other journalists as well -- people who might not be able to check up on the Euromoney article so easily, and/or people who under pressure of deadlines might be more willing to take him at face value. Should I not somehow give them a heads-up?
At the same time, Grebeck had caused me no harm, beyond the time I spent looking into his credentials: it would be cruel of me to splash his name all over Reuters as some kind of exemplar of spurious expertise. Indeed, Grebeck may indeed know a great deal about CDOs and CDSs and whatnot; I certainly hope that he does, for the sake of his clients. (His day job is running a Stamford consultancy providing "client-directed, confidential, research that extracts value from tomorrow's opportunities as credit markets change, today".) He's just one of many financial professionals trying to make a living in these markets, looking for a bit of good press.
So on the grounds that no one much reads felixsalmon.com any more, I'm putting this note up here. I feel I owe it to myself, just to justify the amount of time I spent on Grebeck today.
Umbrellas, cont.
Old friends of mine might remember a question about umbrellas I had back in the 1990s. Has Mark Hurst come up with an answer (page 25)?
Department of weird banners, Cambridge edition
The University of Cambridge is celebrating its 800th birthday this year, and so all around the town are banners like this one:
The obvious question, of course, is what is the significance of those dates? The 1209 and 2009 dates are obvious. And to find out about the others, the obvious place to look is the website at the bottom of the banner, which has a handy timeline. The problem is that although the timeline includes no fewer than 80 different years between 1209 and 2009 (not including the ones at both ends), only one of them coincides with the seven in-between years on the banner: 1446, which marks the founding of King's College. So what are the others?
Pork in East Williamsburg
Another pork-related guest post from Michelle:
Less than 24 hours after Felix returned from Shanghai we cycled over the B'Burg Bridge for more summer weekending in Brooklyn. This time 85 degrees with thunderstorms and tropical showers, but that didn't keep us away from an anticipated pork feast. No way. We hit the 3rd Ward 2nd annual pork roast which included the entire population of Williamsburg hispters plus us, all packed into one building.
We waited in a very long line which did not move for almost one hour, and yet I was completely content drinking a beer patiently (generally not my greatest virtue) while arguing whether or not we were in East Williamsburg or Bushwick as a very loud garage punk band entertained the crowd.
Rockstar butcher Tom Mylan carved up the most gorgeous roasted pig while a team of folks assembled tacos for distribution. Felix and I watched the tacos roll out with small bits of pork as we frowned and looked at each other, "Forget THAT." I was hardly about to wait in a one hour line for tacos. When it was finally our turn, I pushed Felix up to the counter and whispered in his ear, "No rice. No beans, no tortillas - just try and get us the pork". Felix then asked, "Can we order pork only?" and the lady looked back at him with a glare, "That will be $12... EACH." Like it was out of the question or something... Done.
She wrote on our paper plates: "Plate Of Pork" and passed them back to the taco team. They rolled their eyes and passed the plates back to the pig. Yay! Bring it on... large juicy mounds of pork wobbled around on the flimsy plates as we snatched the goods and found a corner to merrily eat in silence.
A wave of euphoria swept over us, like some crazy grease high. Showers came plummeting down from the sky and the crowd took cover, but never left the line. You don't wait that long for Tom Mylan roast pork and leave just because there's a monsoon. Thank you 3rd Ward, thank you Tom & crew. Happy Sunday in Brooklyn, Happy Dead Pig.
Eclipse
It was touch-and-go there, pretty much all the way. In the days leading up to today, Stefan was obsessively checking the forecasts and the satellite pictures, looking at an enormous thundercloud, at least 1,000km across, which was right in the way and which would make the eclipse a total wash.
But then, yesterday, the cloud broke up, and Moganshan -- where we're staying -- was bathed in sunlight. The people operating the resort said that it's always clear in the mornings, and when we climbed the hill to look east over the plain, we were excited to get a perfect eclipse at 9:33am.
When we woke up, however, it was overcast and drizzling, and by the time we were looking out over the plain, you could barely see it, let alone the sun. We were convinced it was going to be a complete washout, where we wouldn't see anything but the sky getting dark and then light again.
Happily, we were wrong. Just as the eclipse was approaching totality, the sun started peeking out from between the clouds, and at one point there was an astonishing sight where you could even see what was left of the sun in the middle of a tiny swatch of blue sky, with sunbeams streaming down between almost-black clouds.
And then it arrived: the sun was blacked out, the corona appeared, and the eclipsed sun spent 5 minutes and 47 seconds peeking in and out behind the clouds. It wasn't dead-of-night dark, but it was definitely late dusk. And decidedly cooler than the normally-sweltering temperatures, too.
We didn't get the Full Eclipse Experience: the dark-indigo sky, the view of the orange horizon, the vision of the shadow of the moon rushing towards you and then away from you at 3,000 miles per hour. But we got something truly special all the same. It was my first total eclipse, I don't know if I'll ever see another. And I'm not in the slightest bit disappointed.
(The photo is by Stefan Geens. That's exactly what we saw.)
White wine contest results
A good time was had by all at the wine contest last night, the rain notwithstanding. The wonderful Pasanella & Son laid on five wines for us, all of them sauvignon blanc or thereabouts.
Wine A was the most expensive, a Vacheron Sancerre which sells for about $30.
Wine B was brought in especially by Pasanella to get a US wine: it was a Walter Hansel Sauvignon Blanc from Sonoma, which retails for about $25.
Wine C was another French wine, a Domaine Massiac from the Languedoc which Pasanella was selling for $10 a bottle.
Wine D was Dog Point from New Zealand, which Pasanella sells for about $20.
Wine E was Basa from Spain, sold by Pasanella for $15 per bottle.
Armed with our range of similar whites at dissimilar prices, we embarked on a not-remotely-blind tasting, and everybody tried to rank the wines in order from most expensive to least. I also asked people to rank each wine out of 20, with limited success, since that wasn't part of the competition and a lot of people didn't bother. And as a tie-breaker we asked everybody to guess the price of the Dog Point. The results are in a Google spreadsheet here.
Looking at the people who judged the taste and not just the price of the wine, the results were close, but unambiguous: the best wine was C, the Massiac -- more people judged it their favorite than any other wine, according to a show of hands I asked for, and it also got the highest average rating. It was certainly my favorite wine. The worst wine was D, the Dog Point.
No one really believes the efficient market hypothesis when it comes to wine: they know that Sancerre and Californian wines are generally more expensive. Still, when they ranked the wines, they tended to say that the ones they liked cost more, and the ones they disliked -- especially the Dog Point -- cost less.
Wines A and C -- the two French wines, which were also the most and the least expensive wines respectively -- both got 13 (out of 44) votes as being the most expensive wine, and both got 4 votes as being the cheapest. People clearly liked them. And people clearly didn't think much of the Dog Point, which was voted cheapest wine by 17 people and second-cheapest by a further 16. Still, they didn't think it was cheap cheap: the average price they put down for it was just over $20, surprisingly accurate.
No one got the exact right result (ABDEC), but two people came very close with ABCED, elevating the better Massiac and pushing down the less good Dog Point. Rolfe Winkler came in second place -- he won the Jill Platner gift certificate -- after guessing that the Dog Point cost $45 a bottle. That seems weird, since he also said it was the cheapest wine. But then again, we'd all had quite a lot to drink by that point. The winner, David Snowdon-Jones, was pretty much spot-on, guessing $22 a bottle. He also had something of an artificial advantage: he arrived quite late, and tasted all the wines systematically, instead of just drinking them in sequence like most of the rest of us. And his dad's a sommelier.
But many congratulations and thanks to everybody for turning up on a rainy night -- we raised a lot of money for the South Street Seaport pirate-flag public art exhibition, which means it's definitely happening. Yay!
A public wine contest
If you've been reading on this blog about the various wine contests I've held over the years, you might have wondered when you'd be invited to one. Well, that day has now come!
Michelle and I have organized a wine contest to be held in the beautiful tasting room at the lovely Pasanella and Son vintners, in the South Street Seaport where Michelle's Sea Warriors public art exhibition is going to be held. The contest will double as a fundraiser for the art project, which will involve flying pirate flags from vintage lampposts; if you donate more than a certain amount, you get to keep one of the flags for yourself when the project comes down.
The wine shop is at 115 South Street, between Beekman Street and Peck Slip -- come along at 6pm on Tuesday June 30. We'll be tasting five different wines, all similar, but which have quite a wide range of prices. Your $40 entry fee will get you a ballot, where you will attempt to rank the five wines in order of price; you can buy as many additional ballots as you like for $20 each. The winner will get an original Michelle Vaughan pirate painting; second prize is a gift certificate to Jill Platner.
Bring as many people as you can -- it's all for a very good cause! Once again:
See you there!
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