Prieur’s readings (September 18, 2009)
This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find interesting.
• Byron Wien (Financial Times): Focus on big ideas for the best chance of future returns, September 15, 2009.
For some time now I have wondered why investors spend so much time trying to anticipate small changes in corporate performance or economic activity, when it is the big shifts that provide the greatest opportunity to make serious money. Perhaps it is easier to figure out whether a company’s quarterly earnings are going to beat the estimates of security analysts or whether the monthly unemployment rate will be higher or lower than expected, but I believe it is better to spend your time trying to think through important trend changes and then waiting them out.
• Andrew Ross Sorkin (The New York Times): Taking a chance on risk, again, September 17, 2009.
Is there more or less risk on Wall Street today? If “greed is good” was Wall Street’s unofficial motto of the 1980s, the mantra these days might be “risk is bad”. It’s a calming phrase after a frightening year – but it glosses over several important ideas that make the Street run.
• Damian Paletta and John Emshwiller (The Wall Street Journal): Volcker calls for restricting banks’ risk, trading activity, September 17, 2009.
Former Federal Reserve Chairman Paul Volcker on Wednesday said banks should operate in a much less risky fashion, including not making trading bets with their own capital, comments that could provoke intensified debates over the future of financial regulation.
• Jim O’Neill (Financial Times): No need for an orderly queue to exit, September 17, 2009.
The pressure is on for leading countries to agree a co-ordinated strategy to lift emergency measures next week. They may well fail – but it should not matter.
• Lena Komileva (Financial Times): Can the rally end the liquidity crisis?, September 16, 20909.
The capital markets recovery of 2009 has reduced the need for emergency levels of public support in the financial system but it has not reduced the need to improve the economic effectiveness of liquidity. Rebuilding the liquidity arteries in the real economy remains a pre-condition for ending this crisis and ensuring a healthy and sustainable recovery into 2010. Without credit, global markets awash with liquidity will start looking bubbly. And an anaemic recovery coming through the floods of international central bank cash will morph into a liquidity trap. Japan is the country that comes to mind.
• Nouriel Roubini (Forbes): What’s changed since Lehman’s collapse?, September 17, 2009.
What’s different? What’s still the same?
•Simon Johnson (Economix): Where were the bank CEOs on Monday?, September 17, 2009.
Speaking on Wall Street at noon on Monday, President Obama laid blame for the crisis and recession of 2008-09 squarely at the feet of the financial sector. The diagnosis was sound but the rest of his speech was disappointing – the administration’s draft regulatory reforms look lame, banks are fully mobilized against the only proposal with any teeth (a consumer protection agency for financial products), and the president’s call to “please don’t do it again” surely fell on deaf ears. In fact, were any of the most relevant ears even listening? The real news from Monday was not the substance of the speech or the stony silence of the financial elite in the audience, but rather that not a single chief executive of a major American bank was in attendance.
• Philip Stephens (Financial Times): The west’s finger-wagging will not force Iran into line, September 17, 2009.
Sanctions have not worked in slowing the nuclear programme, even if western intelligence services differ on just how far Iran has got. Isolation would play to Mr Ahmadi-Nejad’s favourite narrative of a western plot to humiliate Iran.
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