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I don’t recall where this is from, but it seems appropriate today:

Some reads to start the week:

• Alan Greenspan fights back (Fortune)  Four years after leaving the Fed as the Greatest Central Banker Ever, the longest-serving chairman, the Maestro, Alan Greenspan is the designated goat.

• Dorfman: Buy Stock Now to Ride Second Stage of Bull Market (Bloomberg)

• The perils of economic populism (The New Yorker)

• What I Learned From Hank Paulson’s Book (Real Time Economics) I don’t know about Wessell, but I learned that when the going got tough, Paulson prays. A lot. Personally, I prefer rigorous analytical thinking to prayer, but that’s because I have a bias towards rationality in the public sphere.

• Water From Air Machine Providing Clean Water to Doctors, Nurses and Patients at Port-au-Prince, Haiti Hospital (Yahoo)

• The State of the Internet (Focus)

What are you reading?

Last week, we discussed the issue of where there was a greater chance of a bubble: Stocks or Bonds?

This week, we look at a possible end to the Secular Bull Market in bonds:

Charts via Ron Griess of The Chart Store

See also: Taleb: ‘Every Human’ Should Short U.S. Treasuries

Last week, FT Alphaville noted that PIIGS was becoming an “unkosher” acronym at Barclays Capital.

The oft amusing Jim Bianco suggests that instead of using the phrases PIIGS, we give these acronyms a try:

* DEBT – Dubai EU Brazil Turkey
* SICK – Spain Iceland Columbia Kazakhstan
* DUMP – Dubai Ukraine Mexico Portugal
* PUKE – Portugal UK EU
* STUPID – Spain Turkey UK Portugal Italy Dubai

Here are 10 of the most informative charts I’ve seen regarding Friday’s NFP:

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Click for bigger (and in some cases, ginormous) charts

No Job Gains for a Decade

Bianco Research

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Percentage Job Loss form Recession Start

Chart of the Day

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Cumulative Job Losses

Bianco Research

Read the rest of this entry »

Via Visual Economics, we learn Its Google’s planet — we just live on it:

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http://www.visualeconomics.com/2010-02-03-planet-google-from-philosophies-to-market-shares/

There is a huge front page article in the NYT discussing what we already know — that AIG extracted billions from AIG before ($5.9B) and after ($12.9B)their collapse.

We know that Goldie got paid 100 cents on the dollar post-bailout.But what insured party gets to set their own valuation of losses? According to the article, GS nabbed closer to 300 cents on the dollar pre-collapse of losses.

AIG balked, but the matter never seemed to be settled.

Lucky for Goldman we didn’t do an official reorg for this. Consider what the judge would have rightfully done in what should have been a very complex bankruptcy instead of a smash and grab.

Here’s the TImes:

“By July 2007, when Goldman demanded its first payment from A.I.G. — $1.8 billion — the investment bank had already taken trading positions that would pay out if the mortgage market weakened, according to seven former Goldman employees.

Still, Goldman’s initial call surprised A.I.G. officials, according to three A.I.G. employees with direct knowledge of the situation. The insurer put up $450 million on Aug. 10, 2007, to appease Goldman, but A.I.G. remained resistant in the following months and, according to internal messages, was convinced that Goldman was also pushing other trading partners to ask A.I.G. for payments . . .

Later that month, Mr. Cassano noted in another e-mail message that Goldman’s demands for payment were becoming problematic. “The overhang of the margin call from the perceived righteous Goldman Sachs has impacted everyone’s judgment,” he wrote to five employees in his division.

By the end of November 2007, Goldman was holding $2 billion in cash from A.I.G. when the insurer notified Goldman that it was disputing the firm’s calculations and seeking a return of $1.56 billion. Goldman refused, the documents show.”

Now, AIG’s claims that it was Goldman that forced them into collapse, that “the payment demands were a major contributor to A.I.G.’s downfall,” are sheer nonsense. AIG wrote 3 trillion dollars worth of derivatives with precisely ZERO held in reserve. A drunk driver who drives off the road might as well blame the guy who planted those trees 50 years earlier. Given AIG’s massive mortgage exposure, they were going down anyway. GS just happened to be the one who made the opposite bet. In this zero sum game, AIG’s losses were GS profits.

Be sure to click on the graphic to see the full timeline . . .
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Source:
Testy Conflict With Goldman Helped Push A.I.G. to Edge
Gretchen Morgenson and Louise Story
NYT February 6, 2010
http://www.nytimes.com/2010/02/07/business/07goldman.html

OK, that’s an exaggeration — they appear to have done a short sale, not a walk-away.

Ironic Hypocritical Headline of the Day:

Mortgage Bankers Association Sells Headquarters at Big Loss (WSJ)

CoStar Group buys downtown Washington building for $41.3 million, far below the $79 million the trade group said it paid in 2007

Didn’t the National Association of Realtors do something similar last year?

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UPDATE February 8, 2010, 1:54pm

A friend writes to remind me teh MBA CEO is a hypocrite:

Courson, the CEO, was big on underwater borrowers’ responsibility to continue paying on their loans if they could afford to do so.

“What about the message they will send to their family and their kids and their friends by defaulting?’ he said in a late-2009 interview.

- Debtor’s Dilemma: Pay the Mortgage or Walk Away (WSJ)

This chart, via Ron Griess of The Chart Store,  seems to be plateauing at a very high level:

One of the questions I get all the time is about the economics of the book: How much did it sell, what was your advance, what did it cost to produce. I was thinking about this as I prepare for April 15th, so I did a quick run down of costs.

Here is the skinny: The initial advance for Bailout Nation from McGraw Hill was $50k. You get half upon signing, and the other half when there is an “accepted manuscript” by the publisher.

Recall that there was a small problem with McGraw Hill over my treatment of their S&P division and the rest of the criminally corrupt rating agencies (gee, why did they object to that?). My publishing contract with them gave me final edit, so when they balked at what I had written, I exercised my right to buy the back my manuscript. Once I signed with another publisher (Wiley), I was obligated to return the $25k (which I of course did).

The Wiley contract was a $100k advance, plus back end royalties. The old joke is your agent should insure you never see royalties (i.e., get it all up front). I think I need to sell another 40 -50,000 copies before any royalties come in.

Now, $100k sounds like a lot of money, but in Bookanomics terms, its not much at all. There are all sorts of costs, and they come right off of the top. I ended up with about a fifth of that.

20%? How does THAT happen? Well, right off the bat the agent takes 15%. (That’s gross; my next book deal will be net). That takes us down to $85k. I had to return $25k to McGraw Hill, bringing the net to $60k.

Aaron, who was much more of a collaborator than an editor, was paid $15k. I paid my team of researchers over $10k for their work. (That brings us down to $35k).

I paid for all the cartoons in the book ($3,000) The artwork for the cover (under $1,000), and a few other small incidentals (also ~$1,000).  That doesn’t include all of the blog readers who contributed research, artwork, ideas, notes, editing, reading drafts — all for free.

The final tally:

Revenue:
Advance $100,000

Costs:
Return prior advance $25,000
Agent $15,000
Editor $15,000
Research $10,000
Artwork $4,000
Other $1,000
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Pretax net: $30k
After tax: ~$20k

Pretty astonishing when you see it in black and white.

Now consider this: Over the course of the year, I spent nights, weekends, vacations, and towards the final deadlines, days in the office working on this. My best estimate is I put in about 20-30 hours a week for 15 months (not counting promotional tour, which adds another few 100 hours). Let’s ballpark it and say ~2,000 hours.

So, my pay scale for writing what has been called the best reviewed book on the bailouts is a little better than the current minimum wage.

And a few other writers tell me how lucky I am, that very often, its a break even proposition or worse.

Of course, there are other benefits — People who otherwise wouldn’t have thought twice about you (Him? He’s an idiot!) suddenly start to take you seriously. You become “the guy who wrote the book.” Your speaking fees double, your regular business benefits. Other publishers start pitching you book ideas. In general, your personal brand becomes more valuable. My friend (and book agent) Lloyd Jassin says you write a book to “Build your Brand.”  And their is much truth to that.

There are many intangible benefits as well (book groupies!). In my case, it was cathartic, as it was a productive outlet for all the righteous fury that had built up watching the whole disaster unfold in slow-motion. It helped to “quiet down the voices in my heads.”

But Bookonomics means that making a living writing books is something very few people seem to be able to do . . .

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UPDATE: February 6, 2010, 2:37 pm

As several readers observed, the 1st advance/return was a wash (+$25k -$25k = 0). They are correct.

But as noted above, I am thinking in terms of this years taxes — since I already paid tax on the $25k in 2008, the $25k that went back in 2009 comes off the top of the income statement for this April 15th for 2009.

Ignoring the different years tax consequences for a moment, the total income for the book increases if you offset the $25. That makes the gross $125k, leaving me $55k after costs, with a net after NYS and federal taxes a gain of about ~$33k, which is better than a sharp stick in the eye.

This raises my pay scale from under $10 to to $16 per hour.