Great time to be in the newspaper biz, eh?

I could just put my foot down and refuse to go, but I figure 80 percent of my Merc wages drains my savings considerably more slowly than zero percent, so I’m putting in for one of the Walnut Creek jobs. Walnut Creek is a nice town in the East Bay, close to tons of great trails. It also has BART access to San Francisco, unlike my current abode, and the rents are cheaper, so I don’t have any issues about living up there if I survive the cut.

I once wrote that I wouldn’t give up on the newspaper biz till it gives up on me. Well, the biz has its chance; we’ll see how it goes.

What’s happening to the newspaper biz is nothing like a battlefield … people will walk away with their friends and body parts intact. Some are losing jobs but they are not losing their ability to earn a living.

Still, I can identify with better-he-than-me guilt. Today the Rocky Mountain News publishes its last edition. My employer, who also publishes the surviving Denver Post, will be in much better shape financially, and by extension my paper’s prospects have improved. So my job is probably 3.763 percent more secure than it was yesterday. I don’t feel the least bit good about it.

The Rocky paid good union wages to its newsroom of 230 or so. A few of the paper’s stars got hired on by the Post but the rest are in deep doo-doo, economically. There are no other newsroom jobs anywhere in the country that pay the kind of wages they earned at the Rocky. Really, none.

I figure they’ll do OK … getting a paper out every day requires resourcefulness that’s always in demand (except, perhaps, now). The economy will turn around eventually, though minus a few more newspapers.

I’ve been expecting this day for 15 years. I remember thinking in about 1995 that newspapers had about five years till Internet broadband rendered them obsolete. Here we are nine years later and I’m still working for one.

But my illusions are gone. The end is no longer near. It’s here.

What dies with the Rocky is the age of big-city newspapers that matter. Papers of some sort will probably always be around, but they won’t be able to attract big-time talent until they can offer something better than more work for less pay. Maybe in a generation, after all the trapped-in-the-old-era farts like yours truly have been shunted aside by new blood, young newsies will be content to earn their stripes on starvation pay like cub reporters always had to do in previous golden ages of newspaper journalism. It’ll probably be good for the craft.

It’s not much consolation to the folks in Denver, I realize, but endings always lead to beginnings. Something newer, cooler, smarter, etc. will come of all this in a few years. And if it doesn’t I will still have successfully delayed getting a real job until I had to.

Here’s a guy, Hollywood Movie Star and successful beyond most of our wildest dreams, revealing something I suspect a lot of black people are thinking today: America, finally, feels like our country now.

As a white guy I could never presume to know what it’s like to be black in the United States of America, but I suspect it’s been like this: everything we have, The Man can take away. The man dragged us here in chains and kept us there for 300 years. Fought a war that supposedly set us “free” but treated us like dirt for another 100 years. It’s their country, we just live in it.

Until today.

A single Ivy League-educated half-white paid-up member of the nation’s intellectual and financial elite will not fundamentally change America’s race equation. But Barack Obama’s inauguration will say one thing: we don’t have to be the way we’ve always been.

It’s probably dangerous to read too much into what’s happening today: to be the first black president of the United States, you have to be Barack Obama, a guy curiously unaffected by impossible odds against him. Think of what he was up against 18 months ago. Beyond being a member of a racial minority with foreign first and last names and a notorious dictator’s middle name, he had almost no track record in politics. He wasn’t from an established political family. He was a complete outsider.

A guy like him finding a way to become president forces us to widen our ideas about what is possible and impossible.

Obama had no chance, and yet here we are today. Cynicism seems pretty empty in the face of that.

I wonder how many realize that Romenesko is the future of news, and has been every working day for the last decade. What Jim did was vanishingly obvious: identified an audience with a shared self-interest and sent them a daily digest of news they were interested in. He doesn’t have millions of readers like Drudge or Perez Hilton, but I’m guessing he does have about 100,000 (roughly the number of people working in news, last time I looked).

What I’m thinking is: anywhere you can find a 100k audience, you can make a living as a journalist online. The hard part is identifying the audience. The good news is if you start writing about stuff they care about and send a constant stream of timely news via a blog, they will find you. It might take a year or two and you’ll have to bone up on developing a blog, learning search engine optimization and monetizing it via paid clicks (eg, Google AdSense) but the main thing is: those audiences are out there.

Awhile back my wife and I were talking about Caterpillar Inc., the world’s largest manufacturer of earthmoving equipment, which is based in my hometown. Cat runs everything in Peoria so it’s always creeping into the conversations of folks who grew up there. We reasoned that Cat has 100,000 employees worldwide who should be interested in a centralized site for Caterpillar-related news and links. Surely a company of this size with revenue in the tens of billions has a dozen blogs devoted to it already, right? Nope.

Now there’s one. I started Cat Stock Blog in mid-December with the idea of answering a simple question on the mind of everybody who works there: how’s the stock doing? I found a free service that provides free stock chart quotes, assembled a mass of links, designed my site logo and just started posting Cat news all within a week of coming up with the idea. The audience is small today, but over time people who work there will get in the habit of checking the site just as we newsies go to Romenesko every day. Here’s one interesting tidbit: Right now Cat workers represent a tiny fraction of my readership, meaning it could go well beyond the 100k figure.

I’ll be the first to admit that blogging about tractors is not the sexiest topic on Earth. I’d much rather blog about cars, movies, rock ‘n’ roll or walking in the woods, but the first three are covered to death and the last one has very small audience potential (hikers don’t blog, bloggers don’t hike; it’s just how it is).

Romenesko lucked out early on by securing a deal with the Poynter Institute, but I’m guessing by now his brand is strong enough that he’ll survive even if Poynter, which owns the St. Petersburg Times, decides he’s too expensive.

The rest of us will not be so lucky: we’ll have to fight, scratch and blog our way to financial security. It’ll force all of us to learn some things about the money side of the biz that we never worried about before. Maybe most of us don’t have all the aptitudes we need. But people in the news biz are curious by nature and addicted to the Next Big Thing.

The Romenesko Effect is simple: blog about something that hits people where they live — their jobs — and they start showing up, habitually. We can do it much better than anybody else can. If we let ourselves find that 100k audience, the future will take care of itself.

Finding this audience vexed me to no end till last week, when just for the heck of it I decided to see if there’s a blog devoted to Caterpillar Inc., the tractor maker based in my hometown. Cat is a Dow 30 component with $46 billion in revenue and 100,000 employees worldwide. It’s the Microsoft of heavy equipment, so you’d think there’d be a blog or two covering the company. I looked: Nada.

Back when I lived in Peoria, the question “how’s Cat’s stock doing?” was pretty much on everybody’s mind. So this is my theory: Cat has 100k employees, all with an abiding interest in how the company’s doing. If I can get just a fifth of those people, I’ve got the 20k audience that’ll turn my $2 a day into $200 — a living wage even in the Bay Area.

I’ve started something at catstockblog.com. If nothing else, it’ll be interesting to the folks back home.

The other day it occurred to me what an extraordinary time we’re living in. That was before Barack Obama very predictably was elected president (go back as far as you can count and you’ll find pretty much every time: the better candidate with the better campaign wins. My eyes misted up a bit at John McCain’s concession speech on election night — I figured after all he’s done for the country, he deserves better. But the whole point of an election is somebody wins and somebody loses. Good man, terrible campaign. Bob Dole had the same experience; here’s hoping the Senator from Arizona doesn’t start flogging Cialis Moments anytime soon.)

Heck, I’m getting fed up with Obamamania already and the guy isn’t even sworn in yet. It could be a long four or eight years for the news biz if Obama runs a tight-ship White House that’s anything like his gaffe-deficient campaign. We have whole departments devoted to presidential screw-ups; what if the prez doesn’t supply any? I don’t want to live in such a world (and I doubt I’ll have to).

But back to the extraordinary times. Forget about America finally getting around to electing a black (well, a half-white Harvard-educated millionaire) president. Had to happen sooner or later; Hollywood’s been preparing us for it for at least 15 years. The real deal, historywise, is the Stock Market Crash of ‘08. Guess what: we lived through it. I’m pretty sure no bankers jumped from high windows … I’d have given my eyeteeth to write this headline: Ledge-Leaper Survives by Landing on Taxpayer (mind you, I stole this gag from a cartoonist; and I don’t have any eyeteeth).

The thing about the Crash is: hard times prove what people are made of far more efficiently than times of plenty. In good times you go to work every day, do the same seven or eight things the same way you did them 14,736 times before, go home and watch the same number of hours of television and buy the same number of consumer goods. Years get wasted on repetition.

In hard times, you think about hanging around the office a bit more to keep yourself in good standing with the ol’ paymasters. If your business is getting beat up, you think less about the seven or eight old things that used to work and start thinking about the seven or eight new things that need to work. Tried-and-true is toast during tough times.

A lot of people I know lost their jobs before the crash. We’re hanging on for dear life at the paper, and every headline saying the auto industry is in a shambles or that retail sales are off by 20 percent is telling us: the money from whence our paychecks flow is getting scarce. We’re in the midst of a union contract negotiation that seems, well, counterintuitive: the whole point of a union is to pry more cash out of the greedy capitalist’s pocket. Suppose our company’s greedy capitalist owner is in hock up to his receding hairline and all the money in his pockets belongs to some bank back east, with interest? We never gave 13 seconds thought to how many Jaguars or corporate jets our owner might have to do without to keep us off the picket lines. But right now, his problems feel like our problems.

I can’t imagine things getting as bad as the Great Depression. I can imagine people getting a little more thoughtful about pinning their prosperity on borrowed money. I can see some good coming from Wall Street and the hedge fund crowd getting their come-uppance. The good times of the past 15 years had us doing everything under the sun with somebody else’s money. Now the whole country’s in hock up to its receding hairline when it needs to have something set aside to ride out the tough times.

Over the years the whole world developed an abiding interest in Americans going into debt to buy stuff they could do without in a pinch. Well, the pinch has arrived, and the world’s reacting like anybody would after a door slamming shut wakes them from a nice afternoon nap: panic first, watchfulness next, then the realization that the world has not come to an end.

It’s true that the Crash of 1929 led to the Great Depression, World War II, hydrogen bombs, the Cold War and Vietnam, all of which we’d leave off the Tourist Brochure of the 20th Century. But after all those calamities, people got a little smarter, a little more humane (nobody firebombs whole cities, leaving 100,000 dead anymore). Somehow, against all odds, the world emerges a teensy-tiny better place after these horrible episodes.

That’s the track record I’m banking on.

I reshuffled after the tech stock crash and had a little bit of luck: after the worst week in Wall Street history, my fund balance in that 401(k) rollover is only down 19 percent — after nine years. In 2004 I launched a cautious, sensible plan to dollar-cost average that account back to health. The credit bubble that energized the most recent bull move got me back to even last fall; even after moving a third of my stake to cash last fall, I lost all the gains of four patient, sensible, diversified years in six weeks. I tried buying back into my stock funds when there was blood on the streets; in seven days the market dived another 20 percent (making half of it back on Monday, fortunately).

Of course it’s unfair to gripe about stocks’ returns after a panic sell-off of epic proportions. Everybody’s portfolio stinks at times like these; it’ll sweeten when the fear turns to greed, as it inevitably does.

What gripes me is that I never did anything greedy; I never bought individual stocks on margin, I never dived into options or futures or currencies, I stayed with sensible mutual funds from a sensible fund family. Buying and holding a single fund, as illustrated above, would have cost me a third of my stake; reshuffling cut my losses to a fifth.

I guess I should be grateful: I’ve lived through two market crashes in eight years and I’m still sitting on 80 cents on the dollar. Many have been wiped out.

Melissa and I call experiences like this “tuition”: the cost of learning how the world works. Over the years I’ve gotten richer in experience, but I’d like to be getting richer in the ol’ rollover account.

One thing I have figured out for absolute certain: The only way to make your account balance rise is to put more into it than you take out. Everything else is casino winnings.

This is must listening for figuring out what’s behind the current stock market sell-off. It describes the workings of “credit default swaps,” which financiers used originally to insure their investments in corporate bonds and make sure they were covered in case the bonds ever defaulted.

Because corporations are highly motivated not to default on their bonds — their bond ratings determine whether they can borrow money to keep their doors open and the lights on — buying insurance against bond default seemed like taking out fire insurance on something that had no reasonable expectation of ever burning down. You know, risk-free.

It works like this: The bonds exist in a world of their own and anybody can buy CDS (credit default swap) as an insurance policy against these bonds never being repaid. In the regulated insurance business, the only person who can insure your house is you. Now imagine if it were possible for all your neighbors to buy fire insurance on your house as well: this is how the unregulated CDS market works.

Why on earth would your neighbors want to buy fire insurance on your house that allowed them to be paid the house’s value if it burned down? Well, say your next-door neighbor saw your toddler playing with fire in the backyard and all the sudden he knows there’s a firebug living on the premises and the fire risk is much higher than anybody else believes. He’d love to go to your insurance agent and say “I’ll pay you a thousand bucks right now if you write me a fire insurance policy so I get paid if the house burns down.”

Your insurance agent knows nothing about the firebug toddler and figures this is the easiest thousand bucks he’ll ever make. It’s so easy that he might sell the premium to somebody else down the line and pocket a commission, or just to make sure he doesn’t get burned, he buys an insurance policy from another agent agreeing to pay him if your house burns down.

This set-up would work fine — all your neighbors and their insurance agents could take out policies on the homes in your neighborhood based on their perceptions of how likely it is that your house will burn down. But imagine what happens if your home actually burns down: now all these insurance agents who’ve taken their easy thousand bucks owe all the neighbors the full value of your home. (Won’t your neighbors cash in big time? Not necessarily: they were buying and selling policies on other homes and now that a house has actually burned, nobody know what those investments are worth anymore).

Remember when Lehman Brothers, the giant investment bank, failed a few weeks back? Well, its bonds were insured by something like $400 billion worth of credit default swaps. When Lehman went bankrupt, its bonds went into default. And now, all the big banks on Wall Street and a bunch of big hedge funds are on the hook for most of that $400 billion, and that’s why they’re not lending to anybody: they’re hoarding cash because they own CDS contracts obliging them to pay anybody who bought insurance on Lehman bonds. An auction will be set up later this week to figure out who gets paid.

Later this month, another auction will settle CDS contracts on Washington Mutual’s defaulted bonds.

How did all these Wall Street wizards get themselves into this jam? Well, they wanted to hedge their risk: if they had one CDS contract requiring them to pay a million dollars if a bond defaulted, they made sure they had another CDS contract paying them the same amount if a default happened. All the Wall Street CDS players traded these CDS contracts back and forth and earned a profit or booked a loss depending on what the market thought the CDS contracts were worth.

Everybody partied like mad till the unthinkable happened: actual defaults on actual bonds. Then it was game over because all these CDS contracts were connected in a chain no stronger than its weakest link. A small number of defaults set off a chain reaction that is spreading havoc on Wall Street as people confront the obligations they’ve taken on in these CDS contracts. If you owe billions you don’t have — and can’t raise — you are insolvent.

It’s going to be a messy few months while all this gets sorted out. Hopefully there won’t be any more massive bank failures to pour gasoline on the blaze before the Fed throws enough money at the financial system to put the fire out.

The saying goes that the United States of America can be trusted to do the right thing only after all other options have been attempted. Given that the proposed bailout went from three pages and a $700 billion blank check to 400-plus pages of Congressional wish fulfillment, I’m guessing we’re still in “other options” territory. 

At a doctor’s appointment the other day, Melissa found herself explaining to the doc what the crisis is all about. The doctor said she talked to CEOs, economics professors and all sorts of educated types who were simply flummoxed on what the hell’s going on — this within a mile of Stanford University, Big Brain Central of the Bay Area. 

Melissa used to work in banking, where Doing Things Smart was carved into the industry’s granite columns and pounded into the heads of the little people who did all the grunt work. She has a hard time believing what happened, happened. People with no credit history granted mortgages on homes they could not afford. Financial wiz kids packaging these junk loans into A-graded “collateralized debt obligations” and selling them to greater fools the world over. Investment banks going under when their risky bets with borrowed money went south.

The keys to understanding what the hell’s going on are leverage and liquidity. I’ll start with leverage:

Everybody with a mortgage is already using leverage and not even realizing it: exploiting the advantages of investing with borrowed money. Say you want to buy a house that cost $200,000. Even if you had 200k lying around you wouldn’t want that much cash tied up in a single investment, so you’d take out a mortgage and put up only a small stake of your own cash: the down payment. If you put $20,000 down and sell the house later at a $20,000 profit, you’ve made a 100 percent profit on your 20k investment. If you put up your whole 200k and earn 20k, it’s only a 10 percent profit. You don’t need an MBA to see which is the smarter way to a) invest 20k and b) protect the other 180k from market risk.

Buying a 200k house on 20k is a 10-to-1 leverage ratio. Big-money investors have found that with clever computer models they can take on extravagant leverage ratios like 30-to-1 and enjoy extravagant profits by buying and selling intricate investment vehicles most commonly called derivatives. As long as they properly assessed the risks against their bets going south, they could rake in the cash. The great thing about massive leverage is how a small amount of your own money can reap a small fortune; the bad thing is that when you bet wrong, you lose money at a 30-to-1 clip and here’s the catch: even if you decide to sell to get out from under these bad bets, there are no buyers — this is where liquidity comes in.

Liquidity merely represents how easy it is to turn an asset into cash. You’ll never have any trouble cashing in your GE stock because millions of its shares trade every day. The big investment banks, meanwhile, had all these highly leveraged bets tied up in obscure financial assets with a very small pool of prospective buyers and sellers. When their bets on these assets started losing money, they couldn’t sell them even if they wanted to: there simply weren’t any buyers.

The federal rescue plan creates a buyer for these securities so financial firms can get them off their books. The securities — tied to home loans, bonds and other kinds of debt that have intrinsic value — can’t sell right now because the financial firms are in a panic spiral: they need free cash to stay alive, but selling off these assets at fire-sale prices obliges them to book huge losses that force them to put up even more cash.

The only way out of the panic spiral is to create a separate market for these securities. They’re worth plenty most of the time (bonds, loans and other stuff folks are highly motivated to pay off); right now everybody’s so focused on keeping the lights on that they can’t or won’t take on the risk. But there’s a decent chance that the feds can buy these securities cheap and sell at a tidy profit down the road.

So that’s a kinda/sorta explanation of what got us to this point. I’m hopeful because all previous predictions of the apocalypse have proved premature.