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 via Investors Insight): This time is different, January 29, 2010.
• Carmen Reinhart and Kenneth Rogoff (Financial Times): Why we should expect low growth amid debt, January 28, 2010.
As government debt levels explode in the aftermath of the financial crisis, there is growing uncertainty about how quickly to exit from today’s extraordinary fiscal stimulus. Research on the long history of financial crises suggests that choices are not easy, no matter how much one wants to believe the present illusion of normalcy in markets. Unless this time is different – which so far has not been the case – yesterday’s financial crisis could easily morph into tomorrow’s government debt crisis.
• Steve Schaefer (Forbes): Don’t rejoice over higher GDP yet, January 29, 2010.
The US economy crushed expectations by growing at a 5.7% clip in the fourth quarter of 2009, but even as Wall Street rallied on the news there are plenty of warning signs of a slower pace ahead.
• Mohamed El-Erian (Financial Times): Greece part of unfolding sovereign debt story, January 28, 2010.
Global investors worldwide are starting to pay more attention to what is unfolding in Greece. Yet most still think of Greece as an isolated case, just as they did for Dubai a few months ago. With time, they will see Greece as part of a much larger investment theme that is a direct outcome of the global financial crisis: the 2008-09 ballooning of sovereign balance sheets in advanced economies is consequential and is becoming an important influence on valuations in many markets around the world.
• Allan Meltzer (The Wall Street Journal): The Fed’s anti-inflation exit strategy will fail, January 27, 2010.
Sooner or later the pressure to lend out excess bank reserves will be unstoppable.
• Daniel Gross (Slate): The gang of five, and how they nearly ruined us, January 29, 2010.
The little-known reason why investment banks got too big, too greedy, too risky, and too powerful.
• Robert Samuelson (Real Clear Markets): Ben Bernanke’s simple task, January 29, 2010.
Now that the Senate has confirmed him for a second term as chairman of the Federal Reserve, Ben Bernanke has, or ought to have, a very simple agenda: improve confidence. This isn’t his job alone, of course. President Obama and Treasury Secretary Timothy Geithner are hardly bit players. But what Bernanke does and says – how he projects himself and the Fed – matters a great deal, and he faces an exacting challenge.
• Andrew Ross Sorkin (The New York Times): Still needed: A sheriff of finance, January 25, 2010.
“We need a global sheriff.” Those were the words of George Soros, the investor and philanthropist, ahead of the World Economic Forum’s annual meeting – not this year, or last year, but in 2008, a little more than a month before Bear Stearns neared collapse. Two years on, a day before the world’s top regulators and bankers converge on the snowy Alps of Davos, Switzerland, to discuss the state of the world economy, we are no closer to any sort of global financial regulator, let alone serious cooperation among countries about reform.
• Randall Forsyth (Barron’s): Does sound money feed credit excesses? January 29, 2010.
Stable money may induce lenders and borrowers to go overboard.
• Joseph Stiglitz (Los Angeles Times): Obama’s banking proposals are a good first step, January 29, 2010.
Regulations to end the “too big to fail” syndrome are moves in the right direction.
• The Economist: Garrottes and sticks, January 28, 2010.
The first of four articles on the implications of the Volcker rule examines reactions on Wall Street.
• Jason Zweig (The Wall Street Journal): Placing your investing chips in the right countries, January 30, 2010.
The weights within MSCI’s All Country World index approximate how all the world’s investors already have placed their bets: 42% in the U.S., 45% in developed foreign markets, 13% in emerging markets. Take those numbers as your base line. If you keep more than that in the U.S. and less in developed foreign markets, your bets are skewed. What insights do you possess into the global economy that hundreds of millions of other investors have somehow overlooked?
• Michael Lewis (Bloomberg): Goldman trader shares three big ideas with Lloyd, January 29, 2010.
A memorandum to Lloyd Blankfein.
