Prieur’s readings (November 12, 2009)

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Daniel Gross (Newsweek): The greatest trade ever, November 10, 2009.
How hedge fund manager John Paulson bet against the real estate bubble and made $15 billion in a single year.

• abc News: SocGen’s top analyst sees market lows next year, November 9, 2009.
Albert Edwards, a top analyst with French bank Societe Generale, expects global markets to hit a new low in 2010, adding that he would not be surprised if the global economy enters another recession next year. Edwards, one of the leading equities bears and a long-term critic of the policies of Western central banks, is skeptical of popular opinion that extreme policy response will safeguard the West against a repeat of Japan’s lost decade of the 1990’s.

• David Hoffman (Investment News): Market timing trumps buy-and-hold strategies during market swings, says NYU study, November 10, 2009.
The fund managers who invest based on macroeconomic trends - and are willing to adjust their portfolios as those trends change - are the managers most likely to add value for investors, according to a study released today by the New York University Stern School of Business.

• James Picerno (The Capital Speculator): Inflation expectations continue to edge higher, November 9, 2009.
One of the supporting pillars in the recent rally is the recognition that inflation isn’t a problem. Last year’s financial crisis knocked the stuffing out of the system’s tendency to devalue the purchasing power of fiat currencies over time. The net result is an unusual level of economic cover for keeping interest rates low–really low. Indeed, the primary goal of the Federal Reserve and its counterparts around the world over the past year has been the unbridled pursuit of higher inflation, though not necessarily high inflation.

• Mish Shedlock (Mish’s Global Trend Analysis): Budget deficits soar out of control in Eurozone, Germany, US, UK, Japan; yen’s last hurrah, November 11, 2009.
Budget deficits are soaring and printing presses are running at full steam everywhere you look including Germany and the Eurozone countries. See any fiat currencies above that you like? Assuming you don’t, I don’t either. Moreover, I think the yen is the worst of the lot on a relative basis. I also think the yen is likely to have a serious currency crisis before the US.

• Krishna Guha (Financial Times): Plea to reduce demand for dollar reserves, November 11, 2009.
The world should try to mitigate flaws in the dollar-based global monetary system by reducing demand for dollar reserves and exploring alternative reserve assets, a group of economists from the International Monetary Fund said.

• Andy Xie (Caijing.com.cn): Why China and Japan need an East Asia bloc, November 10, 2009.
Withering exports and asset bubbles have forced Asians - especially China and Japan - to work harder at free trade pacts.

• Stanley White (Reuters): Japan faces risk of ratings downgrade over debt, November 10, 2009.
Fitch Ratings warned Japan on Tuesday to keep to its borrowing target or risk a credit rating downgrade as the finance minister acknowledged the problem and tried to reassure rattled investors by saying spending had to be cut. Japanese sovereign credit default swaps spreads have nearly doubled in the past week as investors fretted that the government faces a funding crunch over its ballooning public debt, which the International Monetary Fund says will spiral to 227% of gross domestic product next year, by far the worst in the G7.

• Evan Feigenbaum (Financial Times): America risks being left behind in Asia, November 11, 2009
Obama’s challenge is to adapt America’s role by bringing US interests and the new reality of Asian regional co-operation together.

• Jonathan Anderson (Caijing.com.cn): Leaving old, toothless tigers in the dust, November 10, 2009.
Emerging markets are still the economies to watch now that the Asian Tigers have joined the boring, developed nations club.

• Mark Thoma (Economist’s View): “The Fed is already transparent”, November 11, 2009.
I think one of the problems the Fed is facing is that people do not feel like the Fed is operating on their behalf, they don’t think that the Fed’s actions are in their best interests, and they don’t feel like they have any way to do much about it.

• Phil Thornton (Times Online): Brace yourselves for credit crunch II, November 9, 2009.
It’s coming, and is the fault of US private equity firms, said Josh Kosman, author of an alarming book.

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