Prieur’s readings

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This post provides links to some thought-provoking articles I have read over the past few days that you may also find of interest.

• Randall Forsyth (Barron’s): The market’s formula: a square-root rally, June 4, 2009.
After nailing a 40% surge since early March, Doug Kass sees “potholes” in the road ahead.

• Donald Luskin (SmartMoney): Good news has arrived for investors, June 5, 2009.
Three months ago, within days of the bottom in stocks, aggregate forward earnings started to turn around. It was less than a ringing endorsement at first. It just meant that the decline in earnings was now expected to get less bad – not that earnings would actually grow. But it was a perfect buy signal. And now aggregate forward earnings are on the verge of forecasting that earnings growth is back. It’s a buy signal. And if the pattern holds, it will be a good one.

• Holman Jenkins Jr. (Hoover Institution, Stanford Univeristy): The financial markets and fear itself, June & July 2009.
Why investor confidence plunged.

• Mohamed El-Erian (Financial Times): Why Bernanke is right to be worried, June 3, 2009.
Fed chairman Ben Bernanke’s congressional testimony on Wednesday warrants careful attention by market participants – this at a time when policy measures play an unusually large role in determining both absolute and relative values in many markets.

• Paul Krugman (The New York Times): The stagflation myth, June 3, 2009.
The appearance of stagflation was a win for conservative economics, but it was conservative monetary economics that was partly vindicated: Milton Friedman’s assertion that there is no long-run tradeoff between inflation and unemployment turned out to be correct, and is now part of the standard canon. But where is the Great Society in all this? Nowhere. The claim that stagflation proved the badness of liberal ideas is pure propaganda, which not even conservative economists believe.

• Martin Wolf (Financial Times): Rising government bond rates prove policy works, June 2, 2009.
Stanford’s John Taylor and the Harvard historian Niall Ferguson have both argued in the FT that the US fiscal path is unsustainable. Martin Wolf’s view is that there are powerful arguments against fiscal retrenchment right now and he welcomes recent moves in the bond markets.

• Gillian Tett (Financial Mail): Crowded debt sales risks causing “auction fatigue“, June 4, 2009.
Make no mistake: the potential for an accident is rising, as the auction calendar fills. Fingers crossed that the phrase “government bond auction fatigue” is not something that ever hits the headlines of the mainstream press this year. Even – or especially – in those dangerous summer months.

• The Economist: Central banks’ exit strategies – this way out, June 4, 2009.
The Federal Reserve weighs plans to unwind its unconventional stimulus.

• Niall Ferguson (Telegraph): The trillion dollar question: China or America?, June 1, 2009.
Who is going to come out of the economic crisis stronger and with the whip hand – China or America?

• John Authers (Financial Times): China’s health gives rise to fresh growth theory, June 5, 2009.

• David Pilling (Financial Times): China’s success outstrips democracy for now, June 3, 2009.
Twenty years after Tiananmen Square the party has it both ways: authoritarian government with increasing, though circumscribed, market liberalisation.

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2 comments to Prieur’s readings

  • basehitz

    Thank you for the informative posts. I find it helpful to read diverse opinions as a system of checks and balances. All of us are wrong sometimes. Unfortunately, some are disingenuous in doing so. I don’t often call someone out, but in the case of Don Luskin, you may not be aware of some of his history. With the Dow > 14K, he was a loud cheerleader. As the market started to crack in early 2008, he maintained his aggressive stance with phrases such as “buy with both hands”. After the Dow lost nearly 8,000 points, his articles and appearances started blaming others for his bad calls. And now that we’ve had a rally (bounce?) he’s baaaack. Permabulls and permabears are both useless. In Luskin’s case, he also has an attitude problem. Below is a clip of Luskin on Kudlow’s show on May 14,2008. Barry Ritholtz also appeared and was concerned about the economy and market. Yet Barry was respectful of other’s views. Luskin was smug. Please note in particular the arrogance from Luskin and the other permabulls, just BEFORE they got face planted by the Oct ’08 cliff diving event.
    (video from 5/14/08 Barry Ritholtz correctly forecast the economy topping in Oct ’07 and is in the process of decline. The other panelists including Kudlow, Luskin, Jimmy P, practically mocked Ritholtz denying there was any recession and wouldn’t be one. They were all grossly wrong. Ritholtz nailed it.

    Doug Kass was interviewed recently (6/4/09) by Barron’s Randall Forsyth. He said “The same talking heads who were scared witless in March have turned back into perma-bulls,” he adds. He didn’t mention names, but you can figure that out. I don’t watch CNBC anymore because this back-asswards thinking is prevalent there. And Doug Kass has again turned cautious.

  • Thanks Prieur, that’s a mixed bag but makes for some interesting reading.

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