...AND, SOMETIMES, THE THRILL OF THE SNOW:

THE PROBLEM WAS UNTRUSTWORTHY LENDERS, NOT UNCREDITWORTHY BORROWERS:

Subprime mortgages may have been the most lucrative bet of 2012 for hedge funds, with some gaining more than 20% by buying up troubled financial crisis era mortgages.

That's a bet that's been paying off handsomely since 2010, according to Bloomberg Hedge Fund Indices.

"It's been an unusually attractive time to invest in the mortgage market," said Steve Kuhn, head of Pine River Capital Management's $3.5 billion fixed income fund. [...]

Pine River Capital Management is a prime example of how those bets paid off. Its fixed income fund gave investors a 35% return in 2012 by making bets on banks and lenders that helped underwater borrowers restructure their subprime mortgages.

"There had been an idea that almost anyone with negative equity in their home would default," said Kuhn. "Borrowers have behaved better, and there have been fewer defaults than people had thought."

MORE TERRIFIED THAN PROUD:

America, Tocqueville noticed, is an overwhelmingly middle-class country. To be middle class, of course, is to be stuck in the middle--somewhere in between aristocrats and slaves. We rightly think that there's something realistic--something truthful--about seeing ourselves in the middle, in not thinking too little or too much of ourselves.

The good news is that we're free like aristocrats. We can live as we please. Nobody has the right to tell free persons what to do.

The bad news is that, unlike aristocrats, we have to work if we want to eat. So we're free like aristocrats to work like slaves. Well, not exactly like slaves, because we work not for others but for ourselves and our own.

We're very judgmental about work--we think everyone should have to do it. Everyone has interests, everyone needs money, and so everyone should act accordingly. Unlike aristocrats, we take pride in our work, and we measure ourselves by our productivity. More than ever, we middle-class Americans are proud to live in a meritocracy defined by productivity.

EXPOSING THE SECRETS OF THE TEMPLE:

[T]the fewer surprises and mixed messages in communication there are, the more likely the Fed's efforts to shore up the American economy will be effective. In this regard, the central bank's newest strategy of talking about itself -- and notably, of its decision to tie its interest-rate moves to an unemployment threshold -- is a great step forward in economic stewardship. Now, everyone knows what criteria Fed officials are using to guide future policy.

As stark as this move to transparency may seem, it has actually been some two decades in the making. An unlikely proponent was Mr. Greenspan himself when, under his chairmanship, the Fed began to issue brief explanations after each monetary policy meeting, including the votes of each member of the Federal Open Market Committee, the central bank's policy body. This was in contrast to the first eight decades of the Fed's existence, when the Fed would simply buy or sell securities in the market to try to affect credit conditions -- so-called open market operations -- without acknowledging its actions or revealing its intentions.

Under Mr. Bernanke, lips have loosened rapidly with quarterly news conferences, forecasts by F.O.M.C. members of key economic indicators, countless testimonies before Congress and, now, the explicit adoption of a 2 percent inflation goal.

The advantage of such glasnost is that it can give the Fed greater bang for its buck. Buying more government bonds may bring down interest rates today, but getting people to believe that the Fed will continue such "accommodative" policies adds to the potency of its actions in two ways: expectations of future borrowing costs stay low, and uncertainty about future monetary policy (and hence, future borrowing costs) declines. Such knowledge lets firms be more confident about investing and hiring, and gives homeowners and potential home buyers more faith that mortgages will stay affordable, providing support for the housing market.

"CROP, GET YOUR GUT-TAR...":

Mr. Cropper, pianist Booker T. Jones, trumpeter Wayne Jackson and Mr. Cauley recalled how the song was written and recorded, why sounds of surf and gulls were added, and the story behind Redding's famed whistling. Edited from interviews:

Steve Cropper: In the fall of 1967, I was a producer at Stax Records in Memphis and guitarist in Booker T. & the MGs, the label's session band. In November, I was at the studio when Otis Redding called me from the Memphis airport.

Usually when Otis came to town, he waited until he checked into the Holiday Inn before calling me to work with him on songs in his room. This time he couldn't wait. He said, "Crop, I've got a hit. I'm coming right over."

When Otis walked in, he said, "Crop, get your gut-tar." I always kept a Gibson B-29 around. He grabbed it, tuned it to an open E-chord, which made the guitar easier to play slide. Then Otis played and sang a verse he had written: Sittin' in the mornin' sun/I'll be sittin' when the evenin' come/Watching the ships roll in/And then I watch 'em roll away again.

I said, "Otis, hold on. If a ship rolls, it will take on water and sink." He said, "That's what I want, Crop." So we let it go and worked on the rest of the song.

Otis told me he had started writing the song while playing in San Francisco. Producer Bill Graham must have let him stay on his houseboat in Sausalito, because Neil Young told me he had stayed on the boat right after Otis had left to come back East.

When Otis and I finished writing the rest of the song's music and lyrics, I arranged the song and we scheduled studio time. On the date, I was on acoustic guitar, [Donald] Duck Dunn on bass, Al Jackson on drums, Booker on piano, Wayne Jackson on trumpet and two other horns.