Prieur’s readings (August 29, 2009)

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This post provides links to a number of interesting articles I have read over the past few days that you may also find enjoyable.

• Doug Kass ( Sooner or later, the piper must be paid, August 28, 2009.
My view is that investors will shortly see through the current sugar high and the better-than-expected earnings cycle and will begin to look over the valley at the chronic and secular issues that have emerged from the past cycle and from policy decisions aimed at returning the domestic economy toward self-sustaining growth.

• Michael Kahn (Barron’s): Dollar and frothy sentiment are new worries, August 26, 2009.
There’s a fine line between risk taking and risk ignoring. Bulls may be doing both.

• Has the tide turned for corporate profits?, August 27, 2009.
The recent rally in shares has been driven by the low yields available on alternative asset classes like cash and government bonds and by hopes of economic recovery. But if those recovery hopes do not translate into a rebound in profits, it is hard to see how the rally can last.

• Tom Mitchell (Financial Times): China’s long march to stock exchange stability, August 28, 2009.
Assuming that China’s juvenile market is growing up, and has reacted rationally to what has become a less rosy economic outlook, it could bode well for investors betting that this month’s fall heralds a correction rather than a crash.

• Floyd Norris (The New York Times): It’s hard to worry about a deficit 10 years out, August 27, 2009.
Ten years ago, Washington was worried about the budget outlook, and there were forecasts of dire outcomes. And so it is today. The difference is the nature of the worries.

• Paul Krugman (The New York Times): A note on the Bush fiscal legacy, August 27, 2009.
… the projected debt/GDP ratio will be high by US historical standards, but within a range that a number of advanced countries have entered without catastrophe in the past. Still, it’s not good. And I had a thought that I haven’t seen anyone else explore (apologies if someone has already done this). Namely, what would things look like if we hadn’t had 8 years of gross fiscal irresponsibility from the Bush administration?

• Nouriel Roubini (Forbes): The spend-and-borrow economy, August 27, 2009.
What’s the exit strategy from the monetary and fiscal easing?

• The very model of a modern central banker, August 27, 2009.
An academic background stood the chairman of the Federal Reserve in good stead during his first term. Political skills may be more important in his second term.

• Kristen Haunss and Jody Shenn (Bloomberg): Leverage rising on Wall Street at fastest pace since ’07 freeze; August 28, 2009.
Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007.

• Anatole Kaletsky (Times Online): It’s over – but all is changed, utterly changed, August 27, 2009.
For everyone from the man in the street to politicians, financiers and economists, the world will never be the same again.

• Avinash Persaud (Financial Times): We should put sand in the wheels of the market, August 27, 2009.
Variations on the Tobin tax on financial transactions are not only commonplace, but have become easier to enforce.

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