Prieur’s readings (March 15, 2010)

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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.

• Harry Markopolos (BusinessWeek):  How I got the goods on Madoff, and why no one would listen, March 11, 2010.
Harry Markopolos and his ad hoc team of sleuths spent eight years trying to expose Bernie Madoff as a fraud – but the SEC turned a deaf ear. His new book tells the sad tale. (Click here for Amazon’s page on “No One Would Listen”.)

• Simon Johnson (The Huffington Post): The speech for which we have been waiting, March 15, 2010.
For nearly two years now we have waited for a speech. We need a simple speech and a direct speech – most of all a political speech – about what exactly happened to our financial system, and therefore to our economy, and what we must do to make sure it can never happen again. On Thursday, Senator Ted Kaufman (D., DE) is due to deliver a strong blow to the overly powerful and unproductively mighty within our financial sector.

Ted Kaufman: Wall Street reform that will prevent the next financial crisis, March 11, 2010.
Financial regulatory reform is perhaps the most important legislation that the Congress will address for many years to come. Because if we don’t get it right, the consequences of another financial meltdown could truly be devastating.

• Phil Izzo (The Wall Street Journal): Economists credit Fed for alleviating crisis, March 12, 2010.
The $787 billion stimulus package was a good for the U.S. economy, but the Federal Reserve played the biggest role in rescuing the economy from the financial crisis, according to the majority of economists in the latest Wall Street Journal forecasting survey.

• Caren Bohan and Kristina Cooke (Reuters): Cheap cigars, politics and the Volcker Rule, March 12, 2010.
In an interview with Reuters, Volcker said the Volcker Rule would get at the heart of moral hazard – the tendency of traders and financial executives to take large risks with the expectation of a government bailout if things go wrong.

The Economist: The inflation solution, March 11, 2010.
It has long been considered a scourge, an obstacle to investment and a tax on the thrifty. It seems strange, then, that inflation is now touted as a solution to the rich world’s economic troubles.

• John Mauldin (Thoughts from the Frontline via Investors Insight): The implications of velocity, March 12, 2010.

• Gillian Tett (Financial Times): Is this the lull before the storm for US mortgages? March 11, 2010.
What exactly is happening in the bowels of the American mortgage market?

• John Hussman (Hussman Funds): Ordinary outcomes of extraordinary recklessness, March 15, 2010.
To reiterate what the reset curve looks like here, the 2010 peak doesn’t really get going until July-Sep (with delinquencies likely to peak about 3 months later, and foreclosures about 3 months after that). A larger peak will occur in the second half of 2011. I remain concerned that we could quickly accumulate hundreds of billions of dollars of loan resets in the coming months, and in that case, would expect to see about 40% of those go delinquent based on the sub-prime curve and the delinquency rate on earlier Alt-A loans.

• Andrew Gavin Marshall ( Debt dynamite dominoes: The coming financial catastrophe, February 22, 2010.
The people have been lulled into a false sense of safety under the ruse of a perceived “economic recovery.” Unfortunately, what the majority of people think does not make it so, especially when the people making the key decisions think and act to the contrary. The sovereign debt crises that have been unfolding in the past couple years and more recently in Greece, are canaries in the coal mine for the rest of Western “civilization.” The crisis threatens to spread to Spain, Portugal and Ireland; like dominoes, one country after another will collapse into a debt and currency crisis, all the way to America.

• E.S. Browning (The Wall Street Journal): Worries rebound on bull’s birthday, March 9, 2010.
Investors celebrating the new bull market’s first birthday on Tuesday may remember a less happy milestone on Wednesday: the 10-year anniversary of the peak of the technology-stock bubble. The great debate among stock-market analysts these days is whether the market has finally worked off years of excessive prices and can return to steady growth.

• Robert Lenzner (Forbes): Gold is the ultimate asset bubble, March 12, 2010.
Buy gold if you believe, like Soros and Paulson do, that currency debasement is going to accelerate.

• Bill Powell (Time): China’s property: Bubble, bubble, toil and trouble, March 22, 2010.
With the rest of the world still trying to regain its economic footing, the authorities in Beijing are hoping they can shrink a bubble without bursting it entirely. Delicate business, that. And it’s not just the Chinese homeowner who should be praying that they can pull it off.

• Wolfgang Münchau (Financial Times): Shrink the eurozone, or create a fiscal union, March 14, 2010.
Germany’s EMF idea is just a smokescreen. It is not about helping countries in trouble. It is about helping them to get out of the eurozone.

• Spiegel Online: The fundamental flaw of Europe’s common currency, March 9, 2010.
The euro is under attack like never before, as the promises on which it was based turn out to be lies. Hedge funds are speculating against Greek debt, while euro-zone politicians work behind the scenes to cobble together rescue packages. But fundamental flaws in the monetary union need to be fixed if Europe’s common currency is to survive.

• Martin Wolf (Financial Times): The British election that both sides deserve to lose, March 11, 2010.
At a time of crisis, the UK has to choose between a government about which it knows far too much and an opposition about which it knows far too little. Neither side is convincing.

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