The Crisis of Credit Visualized

(via boingboing)
For visual learners, artist/designed Jonathan Jarvis explains the credit crisis.


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

The End of Wall Street

For a while I've meant to read Moneyball, the story of the Oakland A's general manager Billy Beane and his statistics-driven approach to building a winning baseball team.

What I didn't realize was that the author, Michael Lewis, was the same Michael Lewis who got famous for his book chronicling his time as a Salomon Brothers bond trader in the 1980s, Liar's Poker (which I also have yet to read).

Apparently Lewis has started to write a new book attempting to understand and explain the financial system collapse of 2008. After reading this corker of an article by Lewis in Portfolio I cannot wait for this book to come out.

Here Lewis introduces us to a handful of people in and around the industry who did see doomsday coming, and in some cases bet on it. But who themselves could not believe what, exactly, was going on.

One of these character, Steve Eisman, is a merciless character, willing to confront anyone whom he has judged as having no idea what they are doing. Here's a moment from a subprime-mortgage "trade show", at a speech by one company's CEO:

When the guy got to the part of his speech about [his company's] subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

A probability, said the C.E.O., and he continued his speech.

Eisman had his hand up in the air again, waving it around. ... He had his thumb and index finger in a big circle. ...

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

The article ends with Lewis sitting down for lunch with former Salomon Brothers CEO and "King of Wall Street" John Gutfreund, who has still not exactly forgiven him for Liar's Poker, what he calls "your fucking book".

It's crackerjack storytelling. I started reading it as my car's oil was being changed, and when they came to tell me my car was ready I was angry that they had interrupted me.

Seriously. Take the time to read the article. It's my favorite thing on the subject since The Giant Pool of Money.

(Via Kottke, who links to other Lewis pieces as well)

Slate: You've already spent your tax windfall on gas and bread.

Citing Merrill Lynch's chief economist, Slate's Daniel Gross writes:

The chunk of the stimulus package likely to get spent is roughly equivalent to the amount Americans are paying for higher food and gas prices because of inflation. Put another way, you've already spent your stimulus at ExxonMobil.

Here's the math. Merrill Lynch is basing its calculations on two assumptions:
1. that Americans will spend only 40% of their rebate (and pay down debt with the rest, or save it); and,
2. energy and food inflation combined is costing us $50 billion per quarter.

Total stimulus package in rebates: $120 billion.
40% of 120 is 48 billion, eaten up in one quarter.

At first I thought, big deal, there are still three other quarters in the year. People might--operative word, might --choose to spend more than 40% of their rebate. Say, 100%.

$120 billion minus $50 billion minus $50 billion minus $50 billion (3rd quarter) minus $50 billion (4th quarter)...

Oops.

We don't track the gasoline expenses in our house, but this year we're on track to pay $700 extra in groceries, not because the kids are eating more, or because of more organic produce, but simply the increased cost of everything at the store. $4.50 gasoline doesn't faze me. But $4.50 bread: I get sticker shock.

A Locavore's Meat of the Month Club

Over at The Ethicurean, Bonnie Powell announces the start of a new Community Supported Agriculture program that features sustainably grown meat.

The backstory is amazing, which bring to light many of the logistical difficulties of attempting a "cow share," or any kind of subscription program that involves large meat animals (as well as remind the average grocery store buyer that they really don't know where meat comes from). Where do you find a slaughterhouse? How do you divide up beef ribs into 40 subscriptions? (Here's her 2006 post on what to do with an order of 660 pounds of beef and lamb.) Who gets the hog skin? But... it's fascinating to see that the 75 member Bay Area Meat CSA not only has a waiting list, but an email subscriber base of more than 500 people!

New CSA starting in Tomales, based at Clark Summit Farm. You can sign up now, but hurry, they have to cap these subscriptions. Details at Bonnie's post, plus links to other local Meat CSAs.

Subprime Lending Crisis Hilarity

(via boingboing)

Australian political satirists John Clarke and Bryan John Dawe have been skewering the politicians of the day since 1989. In this clip, they make the subprime lending crisis more hilarious than it ought to be.