Prieur’s readings (September 28, 2009)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• John Hussman (Hussman Funds): We’re speaking Japanese without knowing it, September 28, 2009.
After the bubble burst in Japan in 1990, Japanese banks were not compelled to properly disclose their losses either. The predictable result is that the problems resurfaced later, but worse, because they had not been addressed.
• John Authers (Financial Times): A risky revival, September 25, 2009.
The speed of the rally is itself cause for concern. Historically, big sell-offs have typically been followed by big bounces. But as measured by the S&P 500, the current rally is stronger after six months than any predecessor, including those that followed the lowest points of the market in 1932, 1974 and 1982.
• Tom Petruno (Los Angeles Times): Safer in bonds? Yes, to a point, September 26, 2009.
If you had to make a decision today to reallocate money in your 401(k) plan or other investment account, would you sell stocks to buy bonds or sell bonds to buy stocks?
• Ambrose Evans-Pritchard (Telegraph): Money figures show there’s trouble ahead, September 26, 2009.
Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise.
• Gretchen Morgenson (The New York Times): The mortgage machine backfires, September 26, 2009.
With the mortgage bust approaching Year Three, it is increasingly up to the nation’s courts to examine the dubious practices that guided the mania. A ruling that the Kansas Supreme Court issued last month has done precisely that, and it has significant implications for both the mortgage industry and troubled borrowers.
• Robert Shiller (Financial Times): In defence of financial innovation, September 27, 2009.
The fact that a bubble could grow this large is a sign of imperfect financial institutions, rather than overly complex ones.
• Wolfgang Münchau (Financial Times): A recognition of the deep roots of the crisis, September 28, 2009.
We are still a long way from effectively dealing with the underlying causes of the crisis, but global imbalances have finally made it on to the agenda of the G20 summit.
• Liam Halligan (Telegraph): No reform, just a cosmetic patch for a discredited, flawed regime, September 26, 2009.
“The ultimate result of shielding men from the effects of folly,” said the Victorian philosopher Herbert Spencer, “is to fill the world with fools”.
• Richard Posner (The New Republic): How I became a Keynesian, September 23, 2009.
Although there are other heresies in The General Theory, along with puzzles, opacities, loose ends, confusions, errors, exaggerations, and anachronisms galore, they do not detract from the book’s relevance to our present troubles. Economists may have forgotten The General Theory and moved on, but economics has not outgrown it, or the informal mode of argument that it exemplifies, which can illuminate nooks and crannies that are closed to mathematics. Keynes’s masterpiece is many things, but “outdated” it is not.
Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.