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

• Renae Merleq (The Washington Post): Lurking doubts launch a sell-off, October 31, 2009.
Wall Street recorded its sharpest drop in six months Friday as investors, who have been groping for evidence that an economic recovery is gaining steam, responded to renewed signs of weakness calling into question how vigorous the rebound might be.

• John Authers (Financial Times): OK, I called the rally wrong – and here’s why, October 31, 2009.
Where did I go wrong? I often ask myself this question, but this is the first time I have asked it on the back page of the Weekend FT.

• Robert Johnson (Morningstar): No denying anymore, October 31, 2009.
Their new mantra is that the economy’s seemingly effervescent third-quarter robustness is nothing more than a fleeting mirage, a shallow side-effect of government-induced smoke-and-mirrors therapy such as the Cash for Clunkers program. When those programs end, they preach, we will surely fall back into the abyss. I say not.

• Wolfgang Münchau (Financial Times): We must not be too late with starting the Big Exit, November 1, 2009.
If we stick to the zero interest rate policy for too long, we risk a degree of economic instability much more extreme and costly than the recent financial crisis.

• Clive Crook (Financial Times): Congress misses the point of reform, November 1, 2009.
More than a year after the US financial emergency went critical, the underlying causes have yet to be addressed. When it comes to improving financial regulation, the crux of the matter, there has been a lot of talk – usually about the wrong things – and next to no action.

• Michael Panzner (Financial Armageddon): Bad C’s, October 30, 2009.
In an interesting twist of fate, the firms that have traditionally decided who should get credit have been put in the position of needing extraordinary amounts of other people’s money just to stay alive. Unfortunately, based on what we’ve seen so far, including reports like those that follow, it’s doubtful whether most, if not all, of today’s troubled financial institutions would even qualify for a loan based on traditional measures of suitability – like “character”, for example – if their friends in high places weren’t so intimately involved in the process.

• Nouriel Roubini (Financial Times): Mother of all carry trades faces an inevitable bust , November 1, 2009.
The Fed and other policymakers seem unaware of the monster bubble they are creating. The longer they remain blind, the harder the markets will fall.

• Ambrose Evans-Pritchard (Telegraph): It is Japan we should be worrying about, not America, November 1, 2009.
Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world’s second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending – and allowing it to push public debt beyond the point of no return.

• John Hussman (Hussman Funds): Risk management and convex return profiles, November 2, 2009.
This article deals with the analysis of “convexity,” and its implications for how we should approach uncertainty in what seems likely to remain a very tenuous investment environment.

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