Prieur’s readings (August 6, 2009)

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

• Richard Thaler (Financial Times): Markets can be wrong and the price is not always right, August 4, 2009.
The “efficient market hypothesis” has been a fact of life for economists. Among other things, it says that asset prices will fully reflect available information; and that it is hard for any investor to beat the market after taking risk into account. Has the last year changed how it is viewed.

• Eric Uhlfelder (Advisor Perspectives): Paul Krugman on prospects of recovery, August 4, 2009.

• Economist.com: A concrete problem, July 30, 2009.
Banks face another round of property-related bad debts: this time it will be flashy offices, not rundown homes.

• Frank Hornig, Christoph Pauly and Wolfgang Reuter (Spiegel Online): Banks reopen global casino, July 28, 2009.
Investment banks, of all things, are making serious money again, thanks in part to government aid. Ironically, they are benefiting from the crisis they helped to create. As profits go up, so do salaries – only this time, it’s the taxpayers who are shouldering the risks.

• George Selgin (The Christian Science Monitor): End the Fed? A not-so-crazy idea, August 3, 2009.
Congressman Ron Paul’s bill may never pass, but history suggests the US economy would be better off without the Federal Reserve.

• Gary North (GoldSeek): Why Bernanke is in panic mode, August 2, 2009.
The more often Bernanke goes on TV, the more people will think: “Methinks he doth protest too much.”

• Maureen Tkacik (The Big Money): Loaded for Bair, August 2, 2009.
Universally regarded as the sole member of the Bush administration’s crisis rescue team to have recognized early both the magnitude of the fraudulence in the mortgage business and the magnitude of the risk that fraud posed to the financial system, Bair has distinguished herself as not only our most populist regulator but, if a recent New Yorker profile is to be believed, our most intellectually curious and competent regulator as well.

• Deborah Kan (Forbes): China may need second fiscal stimulus next year – Roach, August 4, 2009.
China may need a second fiscal stimulus package in 2010 once the impact of the plans announced late last year begins to fade, Morgan Stanley Asia Chairman Stephen Roach said in an interview with Reuters Television on Tuesday. Roach’s views stand at odds with a chorus of optimistic analysts after China last month posted stronger-than-expected annual growth of 7.9 percent in the second quarter.

• Andy Xie (www.my1510.cn): Chinese market is a Ponzi scheme, August 3, 2008.
Chinese stock and property markets have bubbled up again. It was fueled by bank lending and inflation fear. I think that Chinese stocks and properties are 50-100% overvalued. The odds are that both will adjust in the fourth quarter.

• Robert Skidelsky (Financial Times): How to rebuild a shamed subject, August 5, 2009.
It is natural that the failure of the economics profession – with a few exceptions – to foresee the coming collapse should have discredited its scientific pretensions. Economics is revealed to have no more clothes than other social science. Reconstruction of the discipline needs to start with the universities.

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