This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest. Please also add the links to any other thought-provoking articles you would like to share to the comments section.
• Financial Times: The US economy is still struggling, August 14, 2009.
Is the worst over for the US economy? Some recent figures point that way, and much US economic commentary is growing cautiously optimistic. For the moment, though, the emphasis needs to stay on caution not optimism.
• John Authers (Financial Times): Lessons from history, August 14, 2009.
The financial upheaval has been good news for financial historians. Their discipline has not traditionally attracted much interest. Instead, investors went along with attempts to treat finance as a precise science. But many metrics that seemed to work well for years are no longer helpful. And so the effort is on to dig into financial history.
• John Hussman (Hussman Funds): Growth in “potential GDP” shows limited potential, August 17, 2009.
Stocks are currently overvalued, which – if the recession is indeed over – makes the present situation an outlier. Unfortunately, since valuations and subsequent returns go hand in hand, the likelihood is that the probable returns over the coming years will also be a disappointingly low outlier. In short, we should not assume, even if the recession is ending, that above average multi-year returns will follow.
• William Hester (Hussman Funds): Earnings growth forecasts may require a robust economic recovery, August 2009.
During this recent flurry of earnings activity, it’s understandable that investors’ focus has been squarely on the here and now. But a concern that may sit not far from the here and now is that investors will eventually have to look ahead at the level of earnings that are projected for the next few quarters. This level of expected earnings may not produce the same amount of investor optimism and appreciation.
• Ambrose Evans-Pritchard (Telegraph): RBS uber-bear issues fresh alert on global stock markets, August 12, 2009.
Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts.
• Mike Santoli (Barron’s): How the crowd might be wrong, August 15, 2009.
A leathery old piece of cowboy wisdom withrelevance for investors instructs, “Always drink upstream from the herd.” Obviously, it’s better to get to the flow of ideas before they reach the muddy snouts of the crowd. But unlike a cowboy, who can easily see where a hundred head of cattle are and which way the river runs, an investor can be hard-pressed to figure out just where the consensus is clustered.
• Brett Arends (The Wall Street Journal): For stocks, September may me the cruelest month, August 11, 2009.
September is fewer than three weeks away. Feeling nervous? Maybe you should be. For investors, the period between Labor Day and Halloween is proving an annual fright show. And no one knows why.
• Jamil Anderlini (Financial Times): Chinese commodity imports expected to slow, August 17, 2009.
The impact of Beijing’s stimulus package, arbitraging opportunities and stock-piling is fading, a Royal Bank of Scotland report states.
• Timothy Adams and Arrigo Sadun (Financial Times): Global economic council should oversee all, August 16, 2009.
It is time to devise a new architecture for the global economic order geared to the challenges of the 21st century.
