Prieur’s readings (December 10, 2009)

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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.

• Doug Kass ( A couple of concerns, December 9, 2009.
In summary, while we are now ending the year and are squarely in a period of seasonal market strength, I remain bearish in view. I remain net short, and if the animal spirits continue to elevate share prices, I will likely raise the size of my short book. At the core of my pessimism are more tentative signs of economic growth, the vulnerability of the small business and consumer sectors, the aftermath of the credit crisis that will continue to haunt the business cycle in availability and access to credit (e.g. Greece et al.), and generally too bullish market expectations.

• Jeffrey Garten: We must get ready for a weak-dollar world, November 29, 2009.
The two most significant structural consequences of the recent financial debacle are the massive deficits and debts of the US and the shift of economic power from west to east. There is only one effective way for governments to address the combined impact of both: press for a sea change in currency relationships, especially a permanently and greatly weakened dollar.

• Martin Wolf (Financial Times): Why China’s exchange rate policy concerns us, December 8, 2009.
What we are seeing is a failure of adjustment to changes in global competitiveness that has unhappy precedents, notably during the 1920s and 1930s, with the rise of the US, and during the 1960s and 1970s, with the rise of Europe and Japan.

• Caroline Baum (Bloomberg): Jobs lost in great recession may be gone forever, December 9, 2009.
All last week I was frantic waiting for my invitation to the White House Jobs Summit to arrive. I thought about crashing, but recent events persuaded me that was neither prudent nor proper. Besides, my red kimono was at the dry cleaners. Something tells me my views wouldn’t have been well received. I would have told President Barack Obama he faces significant obstacles in his effort to create jobs before the voters go to the polls in November 2010.

• Liz Rappaport and Serena Ng (The Wall Street Journal): Lending squeeze drags on, December 9, 2009.
Consumer lending shrank 1.7% in October, the ninth consecutive drop, extending the dramatic decline of financing available to help fuel the US economy. The $3.5 billion decline, calculated by the Federal Reserve, caps a 4% drop in consumer lending from its July 2008 peak. Before then, borrowing by U.S. consumers – including credit-card debt and auto loans, but excluding mortgages – had been growing for more than a half-century.

• David Segal (The New York Times): Debt raters avoid overhaul after crisis, December 7, 2009.
When the financial crisis began, few players on Wall Street looked more ripe for reform than the Big Three credit rating agencies. So as Washington rewrites the rules of Wall Street, how is the overhaul of the Big Three coming? It isn’t, finance experts say.

• Joseph Stiglitz (Project Syndicate): Too big to live, December 2009.
A global controversy is raging: what new regulations are required to restore confidence in the financial system and ensure that a new crisis does not erupt a few years down the line.

• Tony Jackson (Financial Times): It’s bubbly all round but really, does anyone care? December 4, 2009.
There was something heart-warming about this week’s news that US bankers are resuming their carefree habits from the days of the credit boom. In lending to private equity, it seems, they are once more issuing so called covenant-lite and payment-in-kind loans, whereby borrowers are freed from irksome conditions and can pay their annual interest by simply borrowing more. All this at a time when companies acquired by private equity last time round are sliding into default in record numbers. To paraphrase the satirist Tom Lehrer, it makes a fellow proud to be a banker.

• Edward Hugh (Global Economy Matters): It’s all Greek to me, December 7, 2009.
Greece is only one among several problem pupils, and more than the credibility of the Greek government (of which surely there is little left) is being tested; what is being tested is the credibility of the European Union’s institutional structure.

• K Kumar (The Wall Street Journal): Promoting high growth entrepreneurship in India, December 8, 2009.
The centrality of entrepreneurship in the economic growth of nations is increasingly coming into focus in these troubled times. As pointed out in a recent article in The Economist, even as governments are busy trying to save their economies, policy makers are demonstrating a renewed interest in entrepreneurship and innovation.

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