About Me 0108: Making Money Program

Fortune's Allan Sloan, a longtime journalistic master of tax and accounting, does what he does best and tries to take apart the "bailouts." His conclusion: The government looks like it's going to make money on its interventions in 2008 and 2009, a story best told by Sloan himself. The piece has stirred up some heat. Sloan has to make a number of assumptions -- many of which he admits to -- and definitions to arrive at an approximate figure. One of the biggest surprises is the fact that the Federal Reserve is actually making money on the $1.25 trillion in mortgage-backed securities it bought in 2008-2009 and the $600 billion in Treasuries it acquired in 2010-2011, both of which were part of Quantitative Easing I and II. Although Sloan admits they're popularly known as "stimulus," he considers them part of the bailout because the purchases were designed to stabilize credit markets. The result: The Fed's bigger balance sheet has produced what Sloan calls "profit" of $102 billion, which the central banks sends to Treasury at year's end.

Some of this was known. The Financial Times' Gillian Tett ran through the numbers on the Troubled Asset Relief Program a few months ago and concluded that it was both successful and profitable. But as Sloan points out, based on his assumptions, TARP amounted to only about 3% of the "bailouts."

Sloan admits these numbers are rough. "Our accounting is unconventional because in some places we count what has happened, in some places we project what's likely to happen, and in some places we've done our own numbers because no others exist," he writes. "If things break right, taxpayers could come out $100 billion ahead: our $42 billion profit estimate, plus a $25 billion reduction in the Fannie/Freddie cost, $25 billion more in Fed profits, and a reduction in the $19 billion expense we're showing for TARP." But while he recounts bailout negatives -- moral hazard and the sense the government was picking winners and losers (saving creditors, letting taxpayers suffer) -- he still concludes it was necessary. "But something needed to be done when the financial world was on the brink of the abyss, and the government did something. No matter what your views are, you should be happy that taxpayers, almost miraculously, are coming out ahead rather than hundreds of billions of dollars behind."

Sloan's piece comes off as smart and sensible, if admittedly open to argument on the details. He clearly meant it as a corrective to one of the great idée fixes of the age: That not only were the bailouts a colossal waste of taxpayer funds but that they were actually the problem; without the bailouts, which are popularly thought to have ballooned the deficit and sucked life from the economy, everything would have been fine, except some shady banks and plutocrats would have had to suffer. The bailouts were expressly designed to save rich people.

And herein lies the real lesson of this solid piece of financial journalism: the reaction. On Monday morning, Sloan's piece had attracted 24 pages of comments and counting. A few of them either accepted Sloan's argument or praised Fortune for attempting the analysis in the first place. The rest of them were, in the usual fashion of Web comments, fiercely negative, ad hominem, prone to digression or brutally dismissive. In general, politics trumps any kind of rational argument. Bailouts are viewed as a kind of political sellout, and thus anyone who offers support -- even to suggest they were necessary to avoid a deeper cataclysm -- is shouted down. Many of the commenters can't seem to believe that anyone, certainly not Sloan, can separate their political selves from their analysis. Although it's murky, Sloan is depicted as a lover of Wall Street, a "Rightwing zealot," a member of the "power elite." They argue that Sloan doesn't care about taxpayers or homeowners or, for that matters, the dangers of too-big-to-fail. Or they don't argue at all. "I'm not going to spend time deliberating this story," wrote one commenter. "I'll just say it's laughable at best. Cheers!"

Now, of course, complaining about the incivility of Internet comments is a very old story. But what does emerge from so many of the commenters is (a) a deepening of anger to anything that conflicts with a deeply conspiratorial worldview bordering on the apocalyptic (fed presumably by the game of chicken taking place in Washington and by a lagging economy) and (b) a view of the world on both left and right that simply ignores even the basics of economic analysis. Last week, The Atlantic tackled Frank Rich's attack on President Obama in New York magazine, "Obama's Original Sin," by questioning the thesis that the president's failure to rein in Wall Street somehow hurt job creation. Thompson was civil, calm and, at least in part, complimentary to Rich's talents; and in fact Rich's long and impassioned essay made a number of sweeping assertions that were belied by basic economics. In the comments, Thompson was ridiculed, criticized and belittled. At best, he was characterized as naïve; at worst, he was told that "this article reek [sic] of brown-nosing to the financial plutocracy and plain dishonesty. When it comes to econ and finance, The Atlantic appears to be willing to sink lower than CNBC ..."

Such is the world we live in. If you operate on the Internet, you deal with the comments. A few things should be noted, however. It has grown increasingly difficult to separate out the extreme right-wing Tea Party type from the left-wing Progressive zealot. Often, the only way to discriminate is when they launch an attack on "communists" (right) or Fox (left). In particular, notably after Rich's essay, the insults against Obama from the left were nearly as virulent as from the right; many of them also featured a striking racial subtext. Second, there seems to be an increasing disengagement from any kind of economic reality that I recognize -- a rejection of any complexity or nuance that alters the picture or that smacks of elitism. The real enemy increasingly seems to be anyone occupying a position in the middle, which is viewed as the black heart of corruption and self-deception. Thus Sloan and Thompson are easily characterized as tools of the plutocracy. This is a sad state to find ourselves.

Felix-

With all due respect, you’re either delusional or are purposely (and disingenuously) leaving out any context whatsoever in your analysis.

It’s quite easy to average out the numbers and come to the conclusions you have of “$157 per author per month, or $58 per published article; it also means that the typical paid contributor comes up with 2.7 premium articles per month, on average.” But, again, that approach ignores several key realities.

First, writing is not easy. In fact, it’s probably one of the toughest rackets going. Of course, everyone thinks they can do it, until they actually try and either fail or have a tough go of it. It’s a bit like talk radio. It’s sounds like a great gig – you get to talk for three hours a day! And then you actually go in and realize how incredibly difficult it is to talk for three hours a day and be entertaining, informative, etc. in the process.

Clearly, you are very good at what you do. I consider myself good at what I do. I do not know your history well enough, but I would assume we share some qualities that make us good at what we do and that we’re quite divergent on other counts. But, the one thing that ties us together is our ability to write compelling content that a large enough group of people want to continue to read and get something from.

The point is that achieving what I state here is incredibly difficult. Most people do not have the ability to do it. Therefore, in situations like the one Seeking Alpha sets up, you are going to have a small number of people who produce a majority of the articles and make a majority of the money.

Are you expecting an equilibrium on production and earnings? I hope not. That would suggest that writing is easy and anybody who submits premium articles to Seeking Alpha will (A) get them accepted and (B) be able to keep up the pace to put up numbers that go way above your averages.

If everybody could be that successful, then we’d all be professional hockey players and writers for the Wall

Street Journal.

Lots of people will contribute very few articles to Seeking Alpha’s premium program, thus naturally dragging the average down. Many simply do not have the time due to their primary businesses and many just do not have the inclination to do so.

And, of course, there are many who probably would like to contribute and earn more, but find that writing is just not for them. Some of these folks move on and focus on their strengths or try to get better at writing. Others choose not to look within; opting, instead, to blame everybody else for their inability to make money as a writer.

I think it’s great that you have decided to cover this issue, but I wish you would give it a fair shake.

As for “click-bait articles,” certainly some authors will succumb to this temptation. I can tell you, however, as somebody with more experience than most writing these premium articles, that writing expressly with clicks in mind does not work! I tried it for about a week. And I quickly realized that there’s no rhyme or reason and, like you cannot time the stock market, you cannot guarantee yourself clicks by partaking in some short-sighted and transparent series of ploys.

Articles I thought would blow it up received below average numbers, while ones I thought would be duds have lit it up. Too many variables exist that exist beyond the author’s control.

As a contributor, I have learned that if I focus on a consistent voice and style and do my best to provide value (a different perspective, new information, or a unique take on information) and actionable ideas, the pageviews come as well as a larger following. And I can tell you, firsthand, David Jackson believes in a partnership between Seeking Alpha and contributor. It’s all about what you want to make of it. It’s truly a case of my success ultimately equals their success and vice-versa.

Thanks,

Rocco Pendola

http://seekingalpha.com/author/rocco-pen dola

About Me 0108

Friday, July 29, 2011

Making Money Program

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