Prieur’s readings (July 19, 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.

• John Mauldin (Thoughts from the Frontline and Investors Insight): The debt supercycle, July 17, 2010.

• Martin Wolf (Financial Times): Why the battle is joined over tightening, July 18, 2010.
To tighten or not to tighten – that is the question. It is one to which policymakers have started changing their answers. Are they right to do so?

• Mark Hulbert (Barron’s): It’s dippy to fret about a double-dip recession, July 15, 2010.
About the only thing that has become clear in the debate about whether we will have a double-dip recession is that there is nothing even remotely approaching a consensus on how to define it. Little wonder, therefore, that there is such widespread disagreement about the likelihood of one happening. What, then, is all the “double-dip” debate about?

• Pallavi Gogoi (Daily Finance): The jobless effect: Is the real unemployment rate 16.5%, 22%, or …? July 16, 2010.
Raghavan Mayur, president at TechnoMetrica Market Intelligence, follows unemployment data closely. So, when his survey for May revealed that 28% of the 1,000-odd households surveyed reported that at least one member was looking for a full-time job, he was flummoxed. That translates to an unemployment rate of over 22%, says Mayur, who has started questioning the accuracy of the Labor Department’s jobless numbers.
John Hussman (Hussman Funds): Don’t take the bait, July 19, 2010.
Investors who allow Wall Street to convince them that stocks are generationally cheap at current levels are like trout – biting down on the enticing but illusory bait of operating earnings, unaware of the hook buried inside. I can’t emphasize enough that when you hear an analyst say “stocks are cheap based on forward operating earnings” it would be best to replace that phrase in your head with “stocks are cheap based on Wall Street’s extrapolative estimates of a misleading number.”

• Randall Forsyth (Barron’s), Short summer fling for stocks, July 15, 2010.
Is the summer rally already sputtering? After a 7% pop from the lows in the first week of July, the stock market’s momentum seems to be waning.

• Howard Schneider (The Washington Post): Europe presents main threat to global recovery, IMF says, July 8, 2010.
Europe’s weakened economy is now the central threat to global recovery, as its countries struggle with heavy debt, banks face a reckoning over their lack of capital and growth is slowing, the International Monetary Fund said Wednesday in its first assessment of the world economy since a crisis over government borrowing in Greece. While the agency estimated that growth in the United States and emerging Asian and Latin American countries remains on track, it scaled back projections for Europe and outlined a series of issues there that could – unless controlled – spark problems rivaling those that caused the 2008 collapse of Lehman Bros. “Downside risks have risen sharply” in recent months, the IMF said. “The ultimate effect could be substantially lower global demand.”

• Gillian Tett (Financial Times): “Bail-in” will save the taxpayer from the bail-out, July 15, 2010.
Another day, another round of nail-biting debate about financial reform. On Thursday, the US finalised its mammoth regulatory overhaul, the Senate approving it in a long-awaited final vote. But, even as the end looms, new evidence has emerged that voters are uneasy. A Bloomberg poll for example, shows half the US public question whether this bill will improve finance; instead, many fear the reforms will end up protecting Wall Street at the expense of Main Street.

• Floyd Norris (The New York Times): How to tell a nation is at risk, July 15, 2010.
Which governments will not be able to pay their bills? The ones with private sectors that are not doing well enough to bail out the government. Government finances are important, but in the end it is the private sector that matters most.

• Lexington (The Economist): Where has all the greatness gone? July 15, 2010.
Some Americans want to feel exceptional again. Better not to talk about it.

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