Not really a literary item, but I thought some folks might be interested in a Web site I found recently. Postcrossing is a postcard trading site. When you sign up, you get the address of a randomly selected Postcrossing member. You send them a postcard, and when they receive it and enter it into the system, you get put into the queue to receive a postcard from another member. So far I’ve sent a postcard to Portugal and received one from Finland. For those with an interest in faraway places and/or postcards, Postcrossing is an extremely low impact but rewarding hobby. I’ve always liked getting postcards, but it seems like a somewhat rare method of correspondence these days given the ease and immediacy of electronic methods. In my travels I’ve often picked up postcards, not necessarily to send, just to have as keepsakes. I’m something of a map person, so I’ve often been drawn to postcards with maps on them. I’ve got a small stack of them filed away somewhere right now, but I’ve had this idea that one day I might display them all on a wall of cork in collage form.
Postcrossing
Poetry Notes
I have always wrestled, pretty unsuccessfully I think, with reading and writing poetry, and am often reluctant to discuss it in too much detail, as a novice pilot might be reluctant to land his plane at night. Occasionally, though, poems have the ability to break through whatever barrier to poetry I have inside my head and deliver to me the poignant seed of beauty that supporters of the medium so often rave about. Sometime earlier this year the New Yorker started occasionally putting a poem on its back page instead of the usual “Sketchbook.” One of those back page poems (in the March 3rd issue) was an intensely moving anti-war poem by one of my favorie poets (if it could be said that I have favorite poets) C. K. Williams. It is called “The Hearth.” This one is definitely one of those “break through the barrier” poems for me, as is a very different sort of poem called “The Clerk’s Tale” by Spencer Reece, which appeared on the back page of the New Fiction Issue (June 16 & 23). I love the way this poem makes lyrical the banalities of suburban, modern life. According to the Author Notes for that issue Reece will “publish his first collection of poems next year.” I haven’t been able to find any info about this upcoming book, but I will post if I do find anything out. In other poetry news, FSG recently put out the brick-sized Collected Poems of Robert Lowell. This book has already recieved a ton of press including a major review in the New Yorker and the front page of the New York Times Book Review. The book itself is beautiful and the poems within are melancholy and transcendant; whether you are a longtime fan of Lowell or unaware of his work completely, as you flip from poem to poem you will find it difficult to pull yourself away.So, What Else is NewSometimes, even though there are mountains of unread books all around me, I find myself wishing that one of my favorite writers had a new book out. So instead of continuing to slog dutifully through my teetering piles, I decided to see what will soon be out that I can breathlessly begin to read the very day that I lay my eyes upon it: — David Foster Wallace fans will be happy to hear that an as yet untitled (and perhaps even unfinished) short story collection is slated to come out sometime in January or soon thereafter. — Jonathan Lethem’s remarkable story “View From a Headlock” in this week’s New Yorker turns out to be an excerpt from his new novel The Fortress of Solitude. Look for this one in September. — Vandela Vida, one half of the McSweeney’s super couple, has a new book coming out at the end of August called And Now You Can Go. Here’s an excerpt. — Jhumpa Lahiri has a new book coming out in September called The Namesake. This one was excerpted in the new fiction issue of the New York as a story called “Gogol.” — Apparently David Sedaris’ long-awaited new book will be titled Repeat After Me and will hit shelves a few months shy of a year from now. Anything else out there? let me know.
Turnips, Quarterbacks, and Strawberry Pickers: Credit Default Swaps Made Simple
Last week, Max directed our attention to a major new piece of reporting on the financial crisis: a Portfolio article by Millions favorite Michael Lewis. The author of Liar’s Poker, among other books, Lewis is a gifted explainer of an industry badly in need of explanations. In the Portfolio piece, for example, he immerses us in the world of short-sellers who saw the subprime meltdown coming. However, the key paragraph – wherein trader Steve Eisman has an epiphany about how investment banks are leveraging subprime bonds – resorts to a sports metaphor, and thus fails to demystify an elusive instrument at the center of the financial crisis: the credit default swap (CDS).”When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats,” Lewis writes.But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. ‘They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,’ Eisman says. ‘They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans.’I’ve heard financial insiders inveigh against peons who “don’t know a credit-default swap from a turnip,” but how are we to wise up, if explanations only come in the form of metaphors (athletic or agricultural)? Grabbing a fig leaf from the N+1 playbook, as it were, I decided to ask a friend in finance to explain the Peyton Manning analogy, as simply as possible. Here’s what he had to say (wait for “the rub”):Assume the following: Eisman buys a crappy mortgage security (say, a $1,000 bond from a mortgage given to a strawberry picker who makes $14,000 dollars per year). Say the mortgage rate the strawberry picker pays is 15%. This means he’s agreed to pay $150 a year to Eisman. But Eisman is worried that the strawberry picker will default because the guy’s house value has collapsed and his income is drying up. Thus, Eisman wants to buy insurance on the $1,000 he’s loaned. The way he does this is via a credit default swap.A CDS is essentially an insurance policy on a loan, and here’s how it works. Eisman finds a counterparty willing to sell him insurance on his loan (a big investment bank like Lehman Brothers). Eisman agrees to pay the bank a fixed rate every year for protection of the mortgage security he owns (the crappier the loan, the higher the rate). Let’s say for the $1,000 loan to the strawberry picker, his rate will be 10%. The bank pays him nothing on a regular basis, BUT, if the borrower defaults, they pay him the full $1,000.So: if times are good and everyone makes payments on time, the payments are structured as follows: The strawberry picker pays $150 per year to Eisman; Eisman pays $100 per year to Lehman (which then uses some of the cash to provision for losses, and uses the rest to make more loans). The strawberry picker gets to keep his house, Eisman keeps $50 per year (loan payment from strawberry picker minus the insurance premium he pays to Lehman), and Lehman gets $100.Got the structure? Now here’s the rub.Imagine Eisman never actually had exposure to the loan in the first place. Being the brilliant skeptic he is, Eisman would never lend $1,000 to a strawberry picker with little income. He thinks that strawberry man is doomed to default on that loan, and he actually wants to bet AGAINST him. So instead of giving the loan and buying insurance, he just buys the insurance (hence the often used and rarely understood term “side bet”). To do this, Eisman still has to pay the “premium” for the insurance he’s bought, and since it’s a risky loan, the rate is high (e.g. $100 per year in the example above). [Though he stands to win $1,000 if the loan defaults.] In effect, Eisman is paying a “subprime-like” interest rate to Lehman every year! That’s what Lewis was getting at.I would have used a different metaphor. I would have said it’s like a New Yorker buying a bunch of home insurance policies in New Orleans because you are expecting that there will be a massive hurricane coming to wreck them. Now lets say that the insurance company took the money you were giving it, didn’t provision for the coming doom, and instead, used that money to lend to more people building and buying houses in New Orleans.That’s leverage upon leverage upon leverage. And that’s the mess that is unraveling before us.
Addenda Pt. 1
I started flipping through Malcolm Gladwell’s bestselling book The Tipping Point the other day. In the book, Gladwell explores the idea that all popular trends essentially behave like epidemics, and a slight change in external factors can cause a trend, like an epidemic, to “tip” and then become ubiquitous. He describes how word of mouth is an important part of why this occurs, and also how some initial shift of circumstances begins the process. I quickly realized that I see this phenomenon occurring constantly at the bookstore. The recommend shelf phenomenon that I described a few days ago is an example of this. An intitial shift occurs when I read a book and enjoy it and then pull it from its spot tucked away on the shelf. Once I have displayed it prominently on the recommended shelf, the second part of the phenomenon takes over, word of mouth. Soon, a book that was sitting, forlorn, in a tucked away corner of the store, is selling briskly and you overhear people in the aisles talking about it. Earlier, I spoke about this recommended book phenomenon somwhat disdainfully, but when viewed this way, as a shifting of initial circumstances playing out over time, like Stephen Wolfram’s cellular automata in A New Kind of Science, it is more a fascinating piece of science than indictive of society’s lemming-like tendencies.Addenda Pt. 2My good and old friend Hot Face emailed me with some addenda and additions to yeasterdays post about upcoming books. The new David Foster Wallace collection is tentatively called Oblivion and will come out in March of 2004. Prior to that, in October, he has a new non-fiction book coming out, Everything and More: A Compact History of Infinity. He also mentioned that Stuart Dybek has a new book coming out in November called I Sailed with Magellan. Dybek has long been highly regarded as a short story writer (here’s one called Ant), but this new book is a novel.
Bookspotting
When: Afternoon 11/16/03Where: The Pig, a Bar B Q joint on La Brea Ave. In Los AngelesWho: The woman behind the counterWhat: The Corrections by Jonathan FranzenDescription: “A comic, tragic masterpiece of an American family breaking down in an age of easy fixes, Franzen’s third novel brings an old-time America into wild collision with the era of home surveillance and New Economy speculation. Winner of the National Book Award.”A Lingering QuestionAs much as I loved Crime and Punishment, it is refreshing to step away from Raskolnikov’s paranoid world; however, I still have one unresolved question about the book… Towards the beginning, Raskolnikov has an encounter with a very drunk girl wandering in the street. At first he is protecting her from a predatory man lurking in the shadows, then a police officer shows up and Raskolnikov begins to antagonize him. It’s a very odd scene that I assumed would have some significance later in the book, but as far as I could tell, the three characters never appear again and the incident is forgotten. Has anyone read the book recently? Does anyone remember this scene? Can anyone shed some light on why it is in the book and what it means… if I manage to figure it out on my own. I’ll let you know.
New Mutis
It’s been a while since I’ve mentioned Alvaro Mutis here. His book, The Adventures and Misadventures of Maqroll, is one of my all-time favorites. Unfortunately, though Mutis deserves to be counted among the greats of Latin American literature, aside from Maqroll, not much of his work is available in English, which is why I was excited to see that he’s written the forward to a new book that sounds interesting in its own right. The Adventures of a Cello follows the path of a cello known as the Piatti that was made by Antonio Stradivari in 1720. According to the book description:Over the next three centuries of its life, the Piatti cello left its birthplace of Cremona, Italy, and resided in Spain, Ireland, England, Italy, Germany, and the United States. The Piatti filled sacred spaces, such as the Santa Cueva de Cadiz, with its incomparable voice. It also spent time in more profane places, including New York City bars, where it served as a guarantee for unpaid liquor tabs. The Piatti narrowly escaped Nazi Germany in 1935 and was once even left lying in the street all night.Since 1978, the Piatti has been owned by Carlos Prieto, the author of this book and friend of Alvaro Mutis.
Broadway Bashing
In today’s Public Editor column in the New York Times, Daniel Okrent takes the opportunity to mercilessly bash the Tony Awards as well as the Times’ lavish coverage of them. The only productions eligible for Tony’s are ones that take place “on” Broadway as opposed to “Off,” despite the fact that “the various Off or Off Off Broadway houses … launched all but one winner of the Pulitzer Prize for drama in the last decade (the exception originated in a nonprofit theater in Florida).” Meanwhile back at the Times, Okrent claims that there will soon be better coverage of theatre: “the Times is on the brink of a long-planned, apparently expensive and unquestionably overdue renovation of its cultural report, scheduled to premiere in the fall.”