Prieur’s readings (October 4, 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 interesting.

• John Authers (Financial Times): Triumph of common sense over benchmarks, October 3, 2009.
Rather than watch everyone herd towards benchmarks, while charging fees for active management, in future perhaps a lot of money will be managed passively and the rest will be allocated to investors who can show they have skill, and who have the freedom to go wherever they believe they can profit.

• Randall Forsyth (Barron’s): Is this a real bull or “Red Bull” market? October 2, 2009.
After the caffeine rush of the third quarter, stocks and Treasuries give way to less stimulating market action.

• Paul Krugman (The New York Times): Mission not accomplished, October 2, 2009.
Stocks are up. Ben Bernanke says that the recession is over. And I sense a growing willingness among movers and shakers to declare “Mission Accomplished” when it comes to fighting the slump. It’s time, I keep hearing, to shift our focus from economic stimulus to the budget deficit. No, it isn’t. And the complacency now setting in over the state of the economy is both foolish and dangerous.

• Meredith Whitney (The Wall Street Journal): The credit crunch continues, October 1, 2009.
Anyone counting on a meaningful economic recovery will be greatly disappointed. How do I know? I follow credit, and credit is contracting. Access to credit is being denied at an accelerating pace. Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan.

• Joshua Zumbrun (Forbes): A jobs crisis, October 2, 2009.
All the talk of recession ending is confounded by one simple fact: The job market is not recovering. In September, the 22nd month since the recession began, an additional 263,000 jobs were lost, bringing the total number of unemployed to 15.1 million.

• Mohamed El-Erian (Financial Times): Return of the old ways of thinking threatens recovery, September 28, 2009.
We are at the point of maximum confusion in the multi-year transition of the global economy, markets and policymaking. We have left the global growth regime that was driven primarily by debt-financed consumption in the US, but we have not as yet reached a position of more balanced, albeit anaemic, growth. Those who lack a robust anchoring framework, be they investors or policymakers, risk being misled and backtracking to outdated ways of thinking.

• Rolfe Winkler (Reuters): US economic recovery is “far from fragile” – ECRI, September 25, 2009.
Lakshman Achuthan told Reuters that the group expects an “unstoppable” recovery with “no relevant roadblocks”. Fears over mounting unemployment, debt-laden consumers, and dips in recovery are typical of recessionary times, he said.

• Hot air, September 30, 2009.
The world’s bounciest economies have the most undervalued currencies.

• Rolfe Winkler (Reuters): Moody’s secretive nature described to Congress, September 30, 2009.
Lawmakers slammed a “culture of secrecy” at Moody’s and expanded a credit ratings industry probe to find out why securities regulators ignored a tip that Moody’s managers routinely put profits above ratings quality. The allegations about Moody’s business practices came as Congress considered legislation to curtail rating companies’ practices and expose them to greater legal liability if their rating assessments prove to be wrong.

• John Gapper (Financial Times): Clearing up the future of futures, September 30, 2009.
Banks have found corporate allies in their battle to stop the tough new rules proposed for derivatives, including demanding that standard contracts are traded on an exchange. But they must not be allowed to derail the regulations.

• David Pilling (Financial Times): Optimism endures through China’s upheavals, September 30, 2009.
Citizens are aware of their country’s failings and contradictions. Yet a common view is that these are inevitable side-effects of development. They are tolerable so long as tomorrow is better.

• World Bank – Crisis Talk: China can’t do it alone, September 28, 2009.
China is too often seen as a one-stop shop for the crisis recovery. A replacement for the US consumer? Check. A source of low-cost borrowing to stimulate your OECD economy? Check. A source of investment funds for emerging, commodity-rich economies? Check. Alas, if it sounds too good to be true, it probably is. The search for a more balanced, sustainable global economy does not begin and end in China.

• Steven Roach (TIME): The Evolusion of Asia, October 12, 2009.
Asia appears to be recovering from the global recession faster than the West. But the financial imbalances that triggered the worst economic crisis in memory could still put the brakes on the world’s fastest-growing economies. So warns economist and Morgan Stanley Asia chairman Stephen Roach in his new book, The Next Asia, a collection of his essays and analysis from the past several years that foreshadowed the meltdown.

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