Prieur’s readings (January 18, 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.

• Robert Lenzner (Forbes): Wall Street titans not so titanic, January 15, 2010.
Bosses of the biggest banks offer sheepish regret and plead failure to see the looming risk. This is pathetic.

• Clive Crook (Financial Times): Smarter ways to punish a banker, January 17, 2010.
‘We want our money back, and we’re going to get it,’ said Barack Obama, announcing his levy on financial institutions. Tough talk, and good politics. But anger is a poor basis for policy – especially when combined with a misunderstanding of the issues.

• Jason Zweig (Wall Street Journal): Why many investors keep fooling themselves, January 16, 2010.
A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years. What are we smoking, and when will we stop?

• Michael Santoli (Barron’s): Suspicious minds, January 18, 2010.
Vampire movies, church attendance, conspiracy theories – such things tend to become more popular in times of social unease and economic discomfort. One conspiracy theory gaining undeserved traction on Wall Street lately holds that the Federal Reserve or another government entity might – or must – have been a buyer of stocks or stock futures during the run higher off the March lows.

• Editorial (Investor’s Business Daily): A dollar crisis? January 15, 2010.
As federal spending and debt soar to new highs, many economists have alarmingly concluded that the dollar will soon collapse and take the economy with it. But that scenario is far from inevitable.

• Randall Forsyth (Barron’s): Government bonds – the new junk? January 15, 2010.
From Greece to California to Japan, markets are beginning to worry about what traditionally is deemed a risk-free asset: government debt securities. And that arguably lies behind the rise in the price of gold. In a provocative analysis, Standard & Poor’s finds that gold is reflecting investor skittishness. And those concerns aren’t just the usual ones typically associated with demand for the precious metal – inflation – but also concerns about the other safe harbor in times of trouble, supposedly risk-free government securities.

• Gillian Tett (Financial Times): The story of the Brics, January 15, 2010.
On the desk of Jim O’Neill, chief economist for Goldman Sachs, stand four flimsy flags. They look out of place among the expensive computer terminals of the investment bank’s plush London office, like leftovers of a child’s geography homework or cheap mementos from backpacking trips to exotic parts of the world. But these flags hint at a more interesting story – of the latest way in which money and ideas are reshaping the world. The small scraps of fabric are pennants for big countries: Brazil, Russia, India and China. And almost a decade ago, O’Neill decided to start thinking of them as a group – which he gave the acronym Bric.

• Gillian Tett (Financial Times): Deleveraging out of the debt mire will be an unsavoury task, January 15, 2010.
A year ago, as the world reeled from the subprime mortgage crisis, most investors might have said America. And these days, countries such as Iceland, Dubai or Greece tend to spring to mind, in connection with deadly debt burdens. However, if McKinsey consultants are to be believed, the real leverage giant – at least among the big western economies – is actually the UK. After crunching the data, McKinsey estimates that the gross level of British private and public debt is now 449 per cent of GDP – up from 350 per cent at the start of the decade.

• Harry Hurt (The New York Times): Taking away directors’ rubber stamps, January 16, 2010.
IT sounds like good work if you can get it, and thousands of people in corporate America do. On average, they attend 8 to 12 meetings annually. Although they are supposed to have fiduciary obligations, they often appear simply to warm their assigned seats, and to raise their hands when their leader calls for a vote. For that, they can receive as much as $640,000 a year.

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