Prieur’s readings (May 23, 2011)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• John Hussman (Hussman Funds): Scarcity, usefulness, and getting an edge, May 23, 2011.
There is emphatically no basis on which to expect a durable profit in the financial markets unless an investor makes a habit of executing trades that provide some scarce and useful service to others in the market, or to the economy as a whole.
• Mark Hulbert (MarketWatch): How optimistic is the stock market really? May 20, 2011.
On the one hand, LinkedIn’s initial public offering was so excitedly received that it more than doubled, rekindling memories of the irrational exuberance of the late 1990s. Yet, on the other hand, this week’s Investors Intelligence sentiment survey (which is based on the market outlooks of more than 100 investment newsletters) reported the least number of bulls since last October – when the Dow Jones Industrial Average was around 1,500 points lower than where it is today.
• Barry Ritholtz (The Washington Post): On Investing: The many hats of great investors, May 21, 2011.
Graduation season is upon us. From the next generation of Warren Buffett wannabes, I occasionally hear questions such as “What should I learn to become a great investor?” Contrary to popular belief, investing isn’t a traditional academic discipline. Money management is hardly a typical major …
• John Mauldin (Thoughts from the Frontline & Investors Insight): All for one euro and one euro for all? May 20, 2011.
• Robert Samuelson (Investors.com): Gloomonomics rob recovery of its potential, May 20, 2011.
It may be time to move beyond pessimism. Ever since the financial crisis, Americans have wallowed in fear and anxiety. Understandably. Although a recovery — as defined by academic economists — started about two years ago, it hasn’t felt like one. Of the 8.7 million payroll jobs lost in the recession, only 1.8 million have returned. The recovery rivals the slowest since World War II and faces continued threats. High oil prices. Europe’s debt crisis. Unexpected inflation. Washington’s bickering over the federal debt ceiling.
• Andrew Lilico (The Telegraph): What happens when Greece defaults, May 20, 2011. It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.
• Gillian Tett (Financial Times): Watch out for tail risks hanging over Treasuries, May 19, 2011.
Three years ago, investors received a brutal lesson in why it can be risky for banks or other financial institutions to fund long-term holdings with short-term debt. But could it be time for investors to relearn that concept in relation to sovereign debt? That is a question hovering over the $14,300bn US Treasuries market as the political fight about US fiscal policy intensifies. In recent months, the atmosphere in the Treasuries market has been eerily calm, so much so that this week 10-year yields dropped to their lowest level this year.
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