Prieur’s readings (April 4, 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.

Kathy Kristof (Los Angeles Times): John Bogle – old-fashioned investing advice still applies, March 28, 2010.
There aren’t a lot of investment experts who will tell you what they said 10 years ago and just how much of it turned out to be right. But John Bogle isn’t your average investment expert. Bogle, author of “Common Sense on Mutual Funds,” is right most of the time, which differentiates him from 97% of the mutual fund managers who attempt to beat the market. When he updated his book this year for its 10th-anniversary edition, he put updated passages in red but left the original text, too, so that everyone could see how well his earlier advice held up. Batting average? Almost perfect, about .950, he says.

Steve Matthews (Bloomberg): NBER’s Hall says payrolls make it “pretty clear” recession over, April 3, 2010.
The biggest increase in employment in three years makes it “pretty clear” the deepest US recession since the 1930s has ended, said the head of the group charged with making the call. Payrolls rose by 162,000 workers last month, the third gain in the past five months and the most since March 2007, figures from the Labor Department showed yesterday in Washington. “I personally put lots of emphasis on employment,” Robert Hall, who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, said in an interview. “I would say ‘pretty clear’ is a good description” for whether the economic contraction has ended, he said.

John Mauldin (Thoughts from the Frontline via Investors Insight), Is this a recovery?, April 2, 2010.
We are in a nascent recovery from the depths of the Great Recession, but the question is “what kind of recovery?” Many suggest that we will see a typical recovery, like we have seen with every recession since World War II. As regular readers know, I don’t think we’ve gone through a typical, garden-variety recession, and to expect a typical recovery is more faith-based than factual. We had a deleveraging recession and we are still deleveraging. The process, as shown in studies I have written about, takes years to conclude.

Jason Zweig (The Wall Street Journal): Time to take stock of the recent market rallies, April 3, 2010.
There is no obvious cause for alarm. After all, the latest advance leaves the stock market 23% below its high in October 2007. But there isn’t any cause for complacency, either. This springtime of performance is an ideal opportunity to reflect on some investment rules rules …

Paul Sandison: Is the next crash maybe perfectly predictable? April 2010.
One day soon we may see Taleb’s single grain of sand fall that sets the avalanche rushing down the mountain. But it could also be something much bigger than a grain of sand, something that would automatically produce a very definite reversal indeed, and something that would be seen as perfectly obvious – when the dust has settled after the event. And those that didn’t suspect it coming will kick themselves again for not having seen it as an ever-growing trigger factor.

Robert Lenzer (Forbes): Ride the next 10-year bubble in emerging markets, April 1, 2010.
Emerging economies will account for 70% of global growth from 2010 to 2020. How are you positioned?

Grant Smith (BusinessWeek): Goldman says commodities may witness “violent price spikes”, March 31, 2010.
Commodities are set for “violent price spikes” as constraints on investment in new supplies and emerging market demand lead to shortages, according to Goldman Sachs Group Inc. Volatility in prices is driven by limits in the production and storage of commodities, rather than by financial investors, the bank said.

Jim O’Neill (Financial Times): Tough talk on China ignores economic reality, March 31, 2010.
At the moment, rather oddly, our model suggests that the renminbi is very close to the price that it should be. This has not always been the case.

The Economist: America and the yuan – the truth hurts, March 31, 2010.
Will the Treasury call China a currency manipulator?

John Authers (Financial Times): Bubbles are the fault of many – not the few, April 2, 2010.
How much of the blame for the financial crisis rests on the shoulders of investment managers? The role of bankers in the ghastly mess is well documented. But numerous asset price bubbles do not inflate together and then burst simultaneously, as happened during the crisis, unless investment managers are collectively doing something very wrong. So these questions need to be asked.

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