Lloyd Blankfein in FT
Posted by Eddy Elfenbein on February 9th, 2009 at 10:31 am

Here’s a sample of Lloyd Blankfein in today’s Financial Times:

As policymakers and regulators begin to consider the regulatory actions to be taken to address the failings, I believe it is useful to reflect on some of the lessons from this crisis.
The first is that risk management should not be entirely predicated on historical data. In the past several months, we have heard the phrase “multiple standard deviation events” more than a few times. If events that were calculated to occur once in 20 years in fact occurred much more regularly, it does not take a mathematician to figure out that risk management assumptions did not reflect the distribution of the actual outcomes. Our industry must do more to enhance and improve scenario analysis and stress testing.
Second, too many financial institutions and investors simply outsourced their risk management. Rather than undertake their own analysis, they relied on the rating agencies to do the essential work of risk analysis for them. This was true at the inception and over the period of the investment, during which time they did not heed other indicators of financial deterioration.

The most provocative part is here:

The percentage of the discretionary bonus awarded in equity should increase significantly as an employee’s total compensation increases. An individual’s performance should be evaluated over time so as to avoid excessive risk-taking. To ensure this, all equity awards need to be subject to future delivery and/or deferred exercise. Senior executive officers should be required to retain most of the equity they receive at least until they retire, while equity delivery schedules should continue to apply after the individual has left the firm.

The Money Song
Posted by Eddy Elfenbein on February 8th, 2009 at 2:57 pm

Mapping Bernie’s Victims
Posted by Eddy Elfenbein on February 6th, 2009 at 3:27 pm

Zero Hedge has some great maps showing where Bernie Madoff’s victims are. Why is it always the rich people who have all the money?

Just Get it Over With
Posted by Eddy Elfenbein on February 6th, 2009 at 9:59 am

Another brilliant graph from Jessica at Indexed:

Today’s Job Report
Posted by Eddy Elfenbein on February 6th, 2009 at 8:29 am

Holy crap! Unemployment jumped to 7.6% last month, the worst since September 1992. Nonfarm payrolls plunged by 598,000. The economy has lost jobs for 13 straight months. Since the recession began, the economy has lost 3.6 million jobs–half of that came in the last three months of 2008.
Here’s a look at the unemployment rate since 1995:

Here’s another measure of employment, the number of employed as a percent of the total population.

The traditional unemployment rate only counts folks “in the labor force” so if you’re not looking for a job, you’re not counted. Of course, people stop looking for jobs when there are no jobs so I really don’t get that one.
How’s this for a scary number. If the employed/population rate was at the level it was in April 2000, there would be nearly 10 million more jobs today. Wow.
I’m not a big fan of the nonfarm payroll report because it’s constantly getting revised. Today, the government revised all the monthly numbers for 2008. Can you guess if they were revised better or worse?

Actually, the numbers for January and February were a tiny bit better, most everything else is a lot worse.

The Action Americans Need
Posted by Eddy Elfenbein on February 5th, 2009 at 2:33 pm

The president makes his case in today’s WaPo:

This plan is more than a prescription for short-term spending — it’s a strategy for America’s long-term growth and opportunity in areas such as renewable energy, health care and education. And it’s a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.
In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis — the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive. (Has anybody said this?)
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We’ve seen the tragic consequences when our bridges crumble and our levees fail.
Every day, our economy gets sicker — and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.
Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.
Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.
Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.
And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.
These are the actions Americans expect us to take without delay. They’re patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide.

Russia Is Trying to Shore Up the Ruble By Giving Banks Money to Bet Against the Ruble
Posted by Eddy Elfenbein on February 5th, 2009 at 12:54 pm

Or something like that.

Russia’s central bank is exacerbating the ruble’s 35 percent plunge since August, even as it struggles to defend the exchange rate, by providing loans to banks that speculate on the currency, say Alfa Bank and UniCredit SpA.
Bank Rossii lent 7.7 trillion rubles ($214 billion) in overnight and seven-day loans secured with bonds or other collateral in the 16 trading days last month, about double the 4.8 trillion rubles provided in so-called repurchase auctions in December, central bank data show. The ruble lost 18 percent against the dollar in January. It weakened today beyond the lower limit that the central bank said it will defend.
“A significant amount, if not all, of the speculative attacks on the ruble are funded by the central bank itself,” said Vladimir Osakovsky, Moscow-based economist for UniCredit, Italy’s largest bank.
Prime Minister Vladimir Putin praised the central bank’s “gradual devaluation” policy in a Bloomberg Television interview Jan. 25, saying it avoided a repeat of the financial crisis a decade ago when the ruble plunged as much as 29 percent in a day as the government defaulted on $40 billion of debt. Jim Rogers, chairman of Rogers Holdings, said today that Russia has become “unstable” and may break apart. He’s considering betting against the ruble because of central bank mismanagement.
Policy makers are trying to stop speculators from driving down the currency, which makes it more expensive for borrowers to pay back debt and fuels inflation, at the same time it seeks to hold down interest rates to keep the economy from contracting for the first time since 1998. Russia’s inflation rate rose in January for the first time in five months to 13.4 percent as the weakening ruble pushed up the cost of imports.

Slate’s Curious Economics
Posted by Eddy Elfenbein on February 5th, 2009 at 10:42 am

In Slate, Dan Gross attacks “nutso” claims the government doesn’t creates jobs. He singles out Michael Steele’s for saying, “Let’s get this notion out of our heads that the government create jobs. Not in the history of mankind has the government ever created a job.”
Gross writes: “These claims are so peculiar that it’s hard to know where to begin. Contrary to Steele’s assertion, in the history of mankind, the government has in fact created many, many jobs (including the one he held for a few years: lieutenant governor of Maryland).”
This is news to me. This morning, the Labor Department reported that initial jobless claims rose by 35,000 to reach 626,000, a 26-year high. So let’s make all those folks the lieutenant governor of Maryland.
Problem solved.

Trouble With Double Negatives
Posted by Eddy Elfenbein on February 4th, 2009 at 2:11 pm

“One cannot underestimate how widely admired Tom Daschle is in Washington for his integrity.”
– David Gergen
Think about that statement for a bit. Gergen says the exact opposite of what he means to say which would have been a false statement that would have been ironically true.
After that, the sentence disappears into a post-modernist vortex.

Fiserv’s Earnings
Posted by Eddy Elfenbein on February 4th, 2009 at 1:41 pm

Fiserv’s (FISV) earnings took a big hit last quarter due to a loss on the sale of part of its business. Fiserv made 39 cents a share compared with 58 cents a share for last year’s fourth-quarter. Once you toss out all the charges and one-time stuff, FISV made 85 cents a share which was just a penny below the Street’s estimate. Revenues dropped 4% to $1.06 billion from $1.11 billion.
For the year, adjusted EPS was up 23% to $3.29 compared with $2.67 in 2007. For this year, Fiserv sees adjusted EPS rising 10% to 14% which works out to a range of $3.61 to $3.75.

The stock has basically followed the stock market even though its earnings outlook is far brighter.