Prieur’s readings (November 19, 2009)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• Robert Reich (Robert Reich’s Blog): The great disconnect between stocks and jobs, November 18, 2009.
How can the stock market hit new highs at the same time unemployment is hitting new highs? Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise. Where is this heading? No place good. Without a major shift in policy – both at the Fed and in the White House – the economics point to a big stock-market correction and a double dip. The politics point to substantial losses for Democrats next year.
• Doug Kass (TheStreet.com): The quant bubble, November 17, 2009.
As was the case when Citigroup’s Chuck Prince was dancing in 2007, we never know when and how these trends extinguish themselves. We do know, however, that any serious break in momentum in some of the bubblicious asset classes (perhaps caused by economic disappointment) could precipitate indigestion within the quant fund industry that could weigh on the stock market, more so than many now believe possible.
• The New York Times: Where China outranks the United States, November 14, 2009.
A comparison of how the numbers stack up.
• John Gapper (Financial Times): How to reinvent China’s growth, November 18, 2009.
China faces a complex and perilous transition phase as it tries to transform from a middle-income, high-growth, very big developing economy into an advanced economy with a diversified industrial base.
• David Pilling (Financial Times): Obama seeks change Beijing can believe in, November 18, 2009.
The only way to nudge China towards common goals is to draw it in so that its priorities coalesce with those of other nations.
• Alex Frangos (The Wall Street Journal): Hong Kong to US – please don’t blow our bubbles, November 17, 2009.
The head of the Hong Kong Monetary Authority challenged San Francisco Federal Reserve President Janet Yellen on US monetary policy, suggesting that low interest rates and quantitative easing are creating big headaches for Asian economies.
• Todd Harrison (MarketWatch): The other side of the dollar, November 18, 2009.
Albert Einstein once said that the definition of insanity was doing the same thing over and over again and expecting different results. Through that lens, the current course of fiscal and monetary policy is absolutely insane. It’s not too late to reverse the curse of the lost cause of capitalism. If our policymakers make proactive decisions, demonstrate humility and take steps to rebuild a stable foundation for the future, we could avoid waking up one day to find that our policy has been altogether outsourced to foreign central banks.
• Randall Forsyth (Barron’s): A foolish view of America’s debt, November 18, 2009.
Demand for US securities isn’t the question; it’s the supply resulting from the budget deficit that matters.
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