Prieur’s readings (October 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 enjoy.

• Randall Forsyth (Barron’s): Reflation trade shifting into reverse? October 27, 2009.
Risk assets ranging from stocks to commodities to currencies seem to be faltering after being floated on a sea of liquidity.

• Doug Kass (   My “fast money” recap, October 28, 2009.
I saw some emerging technical signs of market weakness that could override seasonal strength, including three failed rallies in the past week, a contracting number of new highs on the New York Stock Exchange, a breakdown in the Dow Jones Transportation Average and, generally, stocks have begun to sell off on good and bad news. … asked how vulnerable the market was over the short to intermediate term if I used the quantitative models that I derived to make my generational bottom call. … the market appears to be 5% to 12% overvalued.

• Andy Xie ( Central banks, arsonists and playing with fire, October 28, 2009.
Money supply growth has sparked an asset market boom that supports the economy, not the other way around. Don’t get burned.

• Tim Bond (Financial Times): Stimuli can be safely removed, October 28, 2009.
Policy makers will therefore soon need to decide whether the objective of a sustained economic expansion is best served by curtailing the dimensions of any putative bubble, or by underwriting a full recovery in employment. If the recently endemic condition of serial asset bubbles and increasingly wide cyclical swings in GDP is to be interrupted, we should hope that the policy makers will weigh their deliberations somewhat differently to the past.

• Jeremy Siegel (The Wall Street Journal): Efficient market theory and the crisis, October 27, 2009
Neither the rating agencies’ mistakes nor the overleveraging by financial firms was the fault of an academic hypothesis.

• Anatole Kaletsky (Times Online): Three cheers for the death of old economics, October 28, 2009.
The orthodox mathematical model took no account of reality. The new George Soros institute should bring back some sanity.

• Noam Scheiber (The New Republic): The man who killed Glass-Steagall wants it back, October 27, 2009.
John Reed, the man who helped deliver the coup de grace to the Depression-era law against combining commercial banking with investment banking and insurance, now wants to bring it back.

• Robert Skidelsky: Keynes vs. the classics, Round 2, October 13, 2009.
The economist John Maynard Keynes wrote The General Theory of Employment, Interest, and Money (1936) to “bring to an issue the deep divergences of opinion between fellow economists which have for the time being almost destroyed the practical influence of economic theory…” Seventy years later, heavyweight economists are still at each other’s throats, in terms almost unchanged from the 1930’s.

• Pravda: America moving from kingdom of cash to socialism slowly but surely, October 19, 2009.
Obama’s decision not to build the Missile Defense System in Poland and the Czech Republic and his Noble Prize have not yet been comprehended from a philosophical viewpoint. It’s time to do it.

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