The following are some thought-provoking articles I have read over the past few days that readers may also find of interest:
• David Kotok (Cumberland Advisors): Does the stock market rally have legs? April 11, 2009.
• George Magnus (Times Online): Political courage is vital for a real recovery, April 13, 2009.
• John Hussman (Hussman Funds): Green shoots over thin ice, April 13, 2009.
• Financial Times: Britons turn to religion over debt worries, April 12, 2009.
The growing demand for financial and legal advice from places of worship is prompting many to launch a new type of service in the downturn
• John Sylvia (Wachovia): Economics as strategic input to business decision-making, April 13, 2009.
Often the biggest misses in bank strategy have little to do with the day-to-day management of the bank. Instead, these miscues often reflect the difference between actual and expected economic outcomes which drive the underlying success of our customers. Five aspects of the economy provide the strategic input to any tactical banking outlook. We will review each of these factors in turn with the goal of highlighting useful benchmarks to track actual and expected economic performance. These five aspects are growth, inflation, interest rates, profits, and the dollar.
• Christopher Foote, Kristopher Gerardi, Lorenz Goette, and Paul Willen (Federal Reserve Bank of Boston): Reducing Foreclosures, April 2009.
This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. The authors use an economic model to focus on two key decisions: the borrower’s choice to default on the mortgage and the lender’s choice on whether to renegotiate or “modify” the loan.
• Clusterstock: Obama bank fix ‘worse than a lie’ – former regulator Black, April 12, 2009.
With most of America’s biggest banks insolvent, you have, in essence, a multitrillion dollar cover-up by publicly traded entities, which amounts to felony securities fraud on a massive scale.
• Andrew Rice (Portfolio.com): Spoils of prosperity, April 2009.
The fall of apartheid made many people in South Africa – white and black – fabulously rich. Now, with the militant populist Jacob Zuma all but certain to become president and a crippling economic downturn looming, the country is divided not by color but by wealth.
• Barry Eichengreen and Kevin O’Rourke (Vox): A tale of two depressions, April 6, 2009.
Often cited comparisons – which look only at the US – find that today’s crisis is milder than the Great Depression. In this column, two leading economic historians show that the world economy is now plummeting in a Great-Depression-like manner. Indeed, world industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better.
• Nouriel Roubini (Forbes): The outlook for China’s economy, April 9, 2009.
Even with a recovery, things won’t be the same again.
• Jeremy Siegel (Yahoo Finance): How cheap is the market?, April 8, 2009.
The true valuation of the market is no where near as dismal as the aggregate earnings reported by Standard & Poor’s suggest. When portfolios of stocks are weighted by market values, the market is cheap by historical standards.
• Sir Martin Sorrell (Financial Times): The pendulum will swing back, April 8, 2009.
Just as the crash was inevitable, so will be the swing the other way – capitalism will escape from its deathbed but with a more human face and we will see the return of forms of state corporatism familiar to those of us who remember the 1970s.
• The Economist: Whistling in the dark, April 8, 2009.
There are still plenty of shadows looming over the stockmarket.
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