Prieur’s readings (July 20, 2010)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• Julia Werdigier (The New York Times): An outspoken man in a secretive trade, July 19, 2010.
With a sharp wit and a sharper tongue, Mr. Hendry, a plain-spoken Scot, has positioned himself as the public contrarian thinker of this city’s very private hedge fund community. The euro? It’s finished, Mr. Hendry proclaims. China? Headed for a fall. President Obama? “If there was a way to short Obama, I would,” Mr. Hendry said.
• Jeff Sommer (The New York Times): Head for the hills? No way, he says, July 15, 2010.
Long before he began studying economics, Jeremy J. Siegel charted the ups and downs of the Dow Jones industrial average on the walls of his childhood bedroom. That fascination with stocks has never ebbed. Now a professor of finance at the Wharton School of the University of Pennsylvania, Mr. Siegel, 64, knows that not everyone shares this passion – but says he believes that nearly everyone should invest in the stock market and keep their money there as long as they can. Have the unsettled markets of the last few years softened his view? “Not at all,” he said.
• Jeff Saut (Minyanville): Don’t bet the farm, try these strategies instead, July 19, 2010.
I’m familiar with cards, dice, and betting in general. While in college I supplemented the monthly stipend from my parents with the winnings from playing cards. The bluffing, the betting, the showdown was all great drama to me. Back then I learned the “one chip” rule. To wit, each time I won two chips I’d put one into my pocket, not to be used again that night. When I entered this business in 1971 I found that same kind of strategy useful in managing risk.
• Niall Ferguson (Financial Times): Latter-day Keynesians have learnt nothing, July 19, 2010.
The austerity debate: Supersized deficits are denting business confidence, not least by implying higher future taxes. Those, like New York Times columnist Paul Krugman, who liken confidence to an imaginary “fairy” have failed to learn from decades of economic research on expectations.
• John Tamny (Forbes): Despite awful policy, the US is not doomed, July 19, 2010.
The great political writer John Podhoretz recently asked in a column, “How should a self-described patriot think, act and talk about the United States if that self-described patriot believes the elected leadership of the United States has led the country into a ditch that threatens to expand into a bottomless chasm?” Podhoretz is not alone among right-of-center thinkers who feel that President Obama’s love of tax increases, nosebleed spending, and desire to heavily regulate large portions of the economy will send us down a path we can’t recover from. Not to defend Obama’s policies for one second, but all this worrying is very much overdone.
• Brad DeLong (Financial Times): It is far too soon to end expansion, July 19, 2010.
We will know when the time comes to stop expansion. Financial markets will tell us. And not by whispering in a still, small voice.
• Dave Livingstone (bizzXceleration): Wow, deja vu’! economy, outllook & same old misunderstandings, July 19, 2010.
Everything that’s going on now with the economy in terms of a slowdown is/was foreseeable and foreseen (not just by ourselves) and we are returning to a period much lack the aftermath of the last burst bubble with all the same misinterpretations. Only this time there will be no next asset bubble to sustain demand and we’re in for a long period of adjustment. Which everybody is still missing and not preparing for!
• Bill Fleckenstein (MSN Money): Chinese lesson: Better red than Fed, July 16, 2010.
As we continue to walk our economic tightrope between recession and recovery, in many people’s eyes one of the biggest factors keeping us upright continues to be China. As the bond buyer of first resort – for now – in our everything-must-go debt bonanza, as well as supplier of cheap labor and consumer goods, China has wedded its fate to our own. Its economic future and, perhaps more importantly, its policies are inextricably linked to ours.
• Doug Noland (Asia Times): The dollar’s predicament, July 20, 2010.
Gigantic and unending US current account deficits were the major force behind the extraordinary foreign accumulation of our (largely debt) securities. This implies structural deficiencies in both the credit system and real economy. It would also be quite unusual for such a fundamental backdrop to support a strong currency.
• Ambrose Evans-Pritchard (Telegraph): Stress-testing Europe’s banks won’t stave off a deflationary vortex, July 18, 2010.
Euroland’s authorities are inflicting a triple shock of fiscal, monetary, and currency tightening on a broken economy. They are doing so in a region where industrial output is still 14% below its peak, where growth barely scraped above zero over the winter “recovery”, and where youth unemployment is at 40% in Spain, 35% in Slovakia, 29% in Italy, and 26% in Ireland.
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