Prieur’s readings (November 20, 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.

• Ambrose Evans-Pritchard (Telegraph): Is $6,300 fair value for gold? November 19, 2009.
The last parabolic spike in gold took off when central banks joined the fray in the 1970s, hoarding bullion with the same enthusiasm as gold bugs. Dylan Grice from Société Générale says it smells much the same today. He sees an eerie similarity between the decision of India’s central bank to buy half the IMF’s entire sale of gold, and the move by France’s central bank to start converting dollars into gold in 1965.

• Gregory Zuckerman (The Wall Street Journal): John Paulson making big new bet on gold, November 19, 2009.
John Paulson, who scored about $20 billion of profits between 2007 and early 2009 wagering against the housing market and financial companies, is launching a hedge fund dedicated to buying up shares of gold miners and other bullion-related investments, according to investors. Paulson told his investors he personally would invest between $200 million and $250 million in the new fund, which he said will begin on January 1, 2010.

• Courtney Comstock (Clusterstock – The Money Game): Roubini – 10 reasons the recovery will be U-shaped, November 19, 2009.
Still bearish, Nouriel Roubini predicts a slow recovery. In an email to Roubini Global Economic’s clients, he predicts that the economy will recover in a U-Shape. His forecast is in line with Goldman Sachs, who also recently predicted that “gradually is the watch word and a V-shaped recovery remains unlikely”.

• Ambrose Evans-Pritchard (Telegraph): Société Générale tells clients how to prepare for potential “global collapse”, Novemer 18, 2009.
Société Générale has advised clients to be ready for a possible “global economic collapse” over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

• Sophie Leung and Chia-Peck Wong (Bloomberg): China faces asset-bubble risk, PBOC adviser Fan says, November 18, 2009.
China is among the emerging markets facing risks of property and commodity market bubbles, central bank adviser Fan Gang said, joining officials from the region in expressing concern about surging asset prices. “The real risk is really asset bubbles,” Fan, who heads the National Institute of Economic Research, said at a business conference in Hong Kong today. A “Chinese asset bubble would be something very dangerous, that would cause the overheating” elsewhere as well, he said.

• Liu Mingkang (Financial Times): China can build on the base of its sound banks, November 19, 2009.
Only with proper firewalls between them can banks and capital markets function as two engines of economic growth. If one fails, the other can still carry on.

• Martin Wolf (Financial Times): Tax the windfall banking bonuses, November 19, 2009.
The case for generous subventions to banks is to restore the financial system to health. It is not to enrich bankers, particularly not those engaged in the sorts of trading that destroyed the system in the first place.

• Floyd Norris (The New York Times): Volcker criticizes accounting proposal, November 17, 2009.
A proposal to give banking regulators authority to block accounting standards is “a terrible idea”, Paul Volcker, a former chairman of the Federal Reserve Board, said.

• Ron Paul and Jim Demint (The Wall Street Journal): Americans deserve a transparent Fed, November 19, 2009.
Trillion-dollar interventions in the economy merit scrutiny by taxpayers and their representatives.

• Alexandra Stevenson (Financial Times): India losing English advantage to China, November 19, 2009.
India is rapidly losing one of its clear economic advantages over China, with the number of Chinese able to speak English on par with its neighbour and rival, says a new study published by the British Council.

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