Thu 23 Apr 2009
Prieur’s readings
Posted by Prieur du Plessis under Investment, Markets, Money
The following are some interesting articles I have read over the past few days that readers may also like to have a look at:
• John Bogle (The Wall Street Journal): A crisis of ethic proportions, April 20, 2009.
We must establish a “fiduciary society”.
• Martin Wolf (Financial Times): Why the “green shoots” of recovery could yet wither, April 21, 2009.
Is the worst behind us? In a word, no. The rate of economic decline is decelerating. But it is too soon even to be sure of a turnaround, let alone a return to rapid growth. These are still early days.
• Mohamed El-Erian (Financial Times): Bank tests we should get stressed about, April 21, 2009.
The aim is to ensure global consistency in banking that also clarifies accountability and responsibility.
• Simon Johnson (The Atlantic): The Quiet Coup, May 2009.
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government - a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the US, it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
• John Makin (AEI): The Fed battles deflation and class warfare, April 2, 2009.
• Paul Krugman (New York Times): Erin go broke, April 20, 2009.
“What,” asked my interlocutor, “is the worst-case outlook for the world economy?” It wasn’t until the next day that I came up with the right answer: America could turn Irish. And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks.
• Rob Arnott (Indexuniverse.com): Bonds: why bother?, April 2009.
Why are there so many equity market mutual funds, diving into the smallest niche of the world’s stock markets, and so few specialty bond products, commodity products or other alternative market products? Today, investors are still reeling from the devastation of 2008, and the bleak equity results of this entire decade. They have already begun to notice that there were opportunities to earn gains, sometimes handsome gains, in a whole panoply of markets in the past decade - most of which are still difficult for the retail investor to access.
We’re in the early stages of a revolution in the index community, now fast extending into the bond arena. In the months and years ahead, we will see the division between active and passive management become ever more blurred. We will see the introduction of innovative products. The spectrum of bond and alternative products for the retail investor will quickly expand. We will shake off our overreliance on dogma. And our industry will be healthier for it.
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April 23rd, 2009 at 4:40 pm[...] du Plessis shares his current reading list here today. A very interesting comment was apparently spurred from a review of Simon Johnson’s book [...]
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April 25th, 2009 at 4:59 am
My response to John Bogle´s ” crisis of ethic proportions ” above is this. I have absolutely no hope that a ” fiduciary society ” where manager/agents act in a way that reflects their ethical responsibilities to society is possible in our lifetime. Before one can be ethically responsible to society, one must be ethically responsible to oneself. When we have a society that places such enormous VALUE on MONEY/WEALTH, where one´s success, happiness, power, etc. are all measured by money/wealth, people are very easily tempted to sell their souls to the devil, and I´m not talking about religion. One´s integrity loses it´s value. One´s word loses it´s value. One´s responsibility to self loses it´s value and no amount of money is ever enough to fill the void. When young adults come out of high school and make their career choices based only on what salary they can earn, ethics can eventually be very easily compromised. Greed and Denial throughout the entire society were at the root of this financial crisis. People with more money than 3 or 4 generations could ever spend still didn´t have enough. The entire value system in our society has to completely change in order to achieve Mr. Bogle´s ethically resposible model. Is it possible in a capitalistic system ? I honestly don´t know. I hope some people smarter than me have some answers.
F. Lotratio