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Muni Challenging Swap Contracts, Nate Silver Move, Ecigs Dominate Big Data


Tracy Alloway, FT Alphaville, Price discovery, sending Goldman Sachs a message edition, here. Central clearing should fix this for vanilla swaps.

Oakland says it currently pays about $4m a year to Goldman to avoid the lump sum payment of $16m it would need to pay to terminate the swap (a deal which itself is of rather dubious origin). The city refinanced the floating-rate debt originally tied to the swap with fixed-rate bonds in 2008, basically rendering the swap deal pointless.

An analysis of the deal, undertaken by the BLX Group at the behest of the Oakland city council, found that the swap will end up generating net savings of $37.5m over the course of its lifetime. It is due to expire in 2021.

What Oakland’s council members make of that analysis is largely a mystery. They’ve been leaning on Goldman to cancel the swap outright – for free – as opposed to just offering measly concessions on the termination fee price. Their reasoning is that banks basically crashed the financial system in 2008, spurring a rash of industry bailouts, and our current era of historically-low interest rates, which made all those old swap deals vastly unprofitable.

Sam Wang, Princeton Election Consortium, Nate Silver’s move, here.

In my view, Yglesias (and Ezra Klein too) put their finger on what Silver added: storytelling. From 2004 to 2010, I ran a simple site with very little daily essaywriting. My traffic was low. Adding the daily column drove traffic up tremendously. The fact is that readers like the narrative. This is Nate Silver’s contribution: finding a way to make the numbers into a compelling play-by-play. Again, it’s the sports guy in him.

What I find amazing is that journalists don’t use numerical facts in this way. In 2012, one of my favorite themes was singling out a political writer whose narrative was contradicted by known facts (Peggy Noonan, David Brooks, and John Dickerson come to mind). In future campaigns, I hope that kind of Politico-style b.s.-ing will be more constrained by quantifiable information, as Nate and I do.

Rob Wile, BI, The 8 Extraordinary Technologies  Forcing Businesses to Adapt Or Die, here. If you had Ecigs as the long term creative destroyer technology in 2013, you win.

Goldman’s Judy Hong describes e-cigarettes as basically all the good stuff about regular cigarettes but none of the bad. “Imagine a product that is possibly >99% less harmful than cigarettes, delivers a similar user experience and offers a better economic bargain—this is the proposition of electronic cigarettes (e-ci gs).”


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