Prieur’s readings (January 15, 2009)

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This edition of “Readings” comes to you later than usual because I have been on flights for most of the day. In any event, below are some links to a number of interesting articles I have read making my way over from Cape Town to Geneva.

• Fortune: Four pros: Investing in the next decade, January 14, 2010.
The coming 10 years won’t necessarily resemble the past 10. Fortune enlisted four investing sages – Arnott, Grantham, Gross and Siegel – who lay out the opportunities and pitfalls.

• Nouriel Roubini and Arpitha Bykere(Forbes): The coming sovereign debt Crisis, January 14, 2010.
The severe recession, combined with a financial crisis during 2008-09, worsened the fiscal positions of developed countries due to stimulus spending, lower tax revenues and support to the financial sector. The impact was greater in countries that had a history of structural fiscal problems, maintained loose fiscal policies and ignored fiscal reforms during the boom years. Going forward, a weak economic recovery and an aging population is likely to increase the debt burden of many advanced economies, including the US, Britain, “Japan and several eurozone countries.

• Simon Tilford (Financial Times): Europe cannot afford a Greek default, January 14, 2010.
The financial markets would quickly turn their attention to the other eurozone states with unsustainable fiscal positions and poor economic growth prospects.

• Edmund Conway (Telegraph): “Significant chance” of second financial crisis, warns World Economic Forum, January 14, 2010.
There is now more than a one-in-five chance of another asset price bubble implosion costing the world more than £1 trillion, and similar odds of a full-scale sovereign fiscal crisis, a key report warned.

• Andrew Ross Sorkin (The New York Times): Wall St. ethos under scrutiny at hearing, January 13, 2010.
For years, most financial regulation has been focused on protecting the individual investor (though its effectiveness is obviously questionable), leaving professionals and wealthy investors to take whatever risks they choose.

• But if we learned anything in this crisis, it is that most of the sophisticated financial professionals in the world were no better at predicting the market than some amateur investors.

• Stephen Gandel (Time): Bank CEOs continue to fight financial reform, January 14, 2010.
No more regulations, please. That was the message from top executives at four of the nation’s largest financial firms on Wednesday, spoken to a commission set up by an act of Congress to investigate the causes of last year’s credit crunch. But more than a year after poor lending standards, unregulated products and bonus bonanzas helped spark the worst recession since the Great Depression, many say that reining in Wall Street is the only way to prevent another financial crisis.

• Paul Barrett (BusinessWeek): Crisis commission should call Greenspan; January 13, 2010.
Financial reform might take on new life if the former Fed chairman were to admit his and the system’s failings in plain English.

• Marc Lackritz (Financial Times): Separating investment banks will not make us safer, January 14, 2010.
The idea of reimposing Glass-Steagall would be laughable were it not advanced by so many otherwise serious people.

• Michael Boskin (The Wall Street Journal): Don’t like the numbers? Change ’em, January 13, 2010.
Politicians and scientists who don’t like what their data show lately have simply taken to changing the numbers. They believe that their end-socialism, global climate regulation, health-care legislation, repudiating debt commitments, la gloire française – justifies throwing out even minimum standards of accuracy. It appears that no numbers are immune: not GDP, not inflation, not budget, not job or cost estimates, and certainly not temperature. A CEO or CFO issuing such massaged numbers would land in jail.

• Martin Wolf (Financial Times): How the Icelandic saga should end, January 14, 2010.
The combination of cross-border banking with generous guarantees to creditors is unsustainable. Taxpayers cannot be expected to write open-ended insurance on the foreign activities of their banks.

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