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

• David Rosenberg (Financial Times): Equities carry too much risk, September 23, 2009. The banker J.P. Morgan was fond of saying: “I never buy at lows, I never sell at the highs, I play the middle 60 per cent.” Well, from our lens, we are well past that middle 60 per cent point of this bear market rally.

• Roman Frydman and Michael Goldberg (Financial Times): An economics of magical thinking, September 23, 2009. Confidence seems to be returning to markets almost everywhere, but the debates about what caused the worst crisis since the Great Depression show no sign of letting up. Instead, the spotlight has shifted from bankers, financial engineers and regulators to economists and their theories. This is not a

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Summer is over…and the rally may be over, too.

It’s back to business. No more long lunches. No more afternoons painting windows. No more soirees in the evening.

We return to our lonely métier – chronicling the decline and fall of the US economy…and the Anglo-American empire too….

Two bits of news signal the scale of this trend. But first, here’s one two-bit piece of news: the Dow lost 185 points yesterday. Could this mark the beginning of the end for the rally? Yes, it could. Should you be out of US stocks? Yes, you should.

But let’s turn back to our ‘decline and fall’ chronicles…

From Florida, comes news of the first drop in population in 60 years. “Unemployment is soaring,” reports USA Today. “Florida is second to California on foreclosures.”

Yes, dear reader, there is trouble in the sand states…

Florida lost a net 58,000 people this year…for the first time since the 1940s.

Why would

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As you review your investment portfolio to size up your current exposure to gold, keep one key point in mind: When it comes to profits, there’s no rush like a speculative gold rush.

And that’s just what we have at hand.

Inflationary fears are on the march the world over. And most of those worries are due to the trillions of dollars in stimulus spending the world’s central bankers have engineered. Those worries about the pressure from rising prices are destined to cause the next big asset bubble.

And the color of this particular bubble will be gold.

The irony here is that even though central bankers are the cause of this looming bubble in gold prices, a higher gold price isn’t their objective.

They apparently believe that freshly minted “fiat dollars” - trillions of them - are just what’s needed.

Let me explain.

The plan, you see, is quite ingenious - on its face,

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“Just how can the Fed credibly promise to be irresponsible…?”  Here’s a thought—that tiny handful of investors and analysts warning how Fed policy risks hyper-inflation are in fact doing the central bank’s work.

The Fed wants you to believe hyperinflation is looming. Or at least, it shouldwant that, if doubling its balance-sheet – purchasing and lending against investment junk – is going to work the wonders that modern central-bank theory says it can. And the Fed certainly wants you to believe it will stop at nothing to avoid deflation (”whatever means necessary” as the chairman put it back in 2002).

So anyone touting the hyperinflation risk in public is playing the shill, a decoy – seemingly unconnected – proclaiming the miracle powers of Dr.Ben Bernanke’s snake oil to CNBC anchors at every chance.

In fact, they’re doing the Fed’s work better than the Federal Reserve itself. Really.

“The major danger with a zero

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You want to place a bet on future inflation? Well, an opportunity for you to bet on inflation is now in the works. The hedge fund Universa Investments L. P. is planning to open a fund in the near future that will allow you to back up your concern with the possibility that inflation is coming around the corner.

The fund will invest in options tied to commodities and Treasury bonds, among other things. The strategy is a “Black Swan” strategy aimed at taking advantage of wide swings in the prices of these assets.

Of course, the fund is connected with Nassim Nicholas Taleb, the infamous author of the best sellers “The Black Swan” and “Fooled by Randomness.” To Taleb, the probability that high rates of inflation might result from the stimulus efforts of governments around the world has substantially increased. This means that the possibility

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BlackRock's veteran CIO believes this rally can last. But he warns that growth will likely be slow, with some sectors doing better than others.

 

Bob Doll has been chief investment officer of global equities at BlackRock Inc. since 2006. Before that he served in several portfolio management and executive investment positions with Merrill Lynch. Starting in 1999, he became chief investment officer of equities at Merrill Lynch Investment Management Americas. He later was promoted to co-head of that unit and senior vice president at Merrill Lynch. 

During a recent pause in market activity, IndexUniverse.com's Murray Coleman talked to the BlackRock CIO about his take on various sectors and asset classes.  

 

IU.com: Do you think this rally has legs?

Doll: Yes, over time. But it's not going to follow a one-way path heading straight up. There will be some rallies followed by some pullbacks—a lot of volatility still remains in

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Economic Development Minister, Elvira Nabiullina, has said that a reworked anti-crisis program will soon be submitted to the cabinet.  Russia announced a budgetary deficit of $1.5 billion in the first quarter.  Foreign Minister, Sergei Lavrov, says that the world's financial systems will have to be radically overhauled in the wake of the crisis.  Banks' bad loans may increase fourfold to $70 billion this year.  Russian Railways is predicting losses of $1.48 billion in 2009 and will make 53,700 workers redundant.  The investment branch of Russian lender VTB has created an index for foreign investors to speculate on whether the ruble will fall.  Mobile Telesystems says Blackberries will go on sale in Russia within the next two weeks.  Meat firm Cherkizovo announced a 27% increase in net income, and is positive about prospects in 2009.  ...

The following is the text of the Statement from the Group of 20 summit.  I will translate and interpret it point by point.

1. We, the Leaders of the Group of Twenty, met in London on 2 April 2009.

2. We face the greatest challenge to the world economy in modern times; a crisis which has deepened since we last met, which affects the lives of women, men, and children in every country, and which all countries must join together to resolve. A global crisis requires a global solution.

Things stink all over due to this mess, and it has gotten worse lately.

3. We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared; and that our global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries

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As the G-20 leaders meet in London, one graph should remind the representatives of these disparate countries of their shared interest in restoring the health of the financial systems of the developed countries.

Figure from Box 2 IMF.

What this graph shows is financial stress in the advanced economies leads to financial stress in the emerging markets.

The indices depicted were developed for individual countries and will be detailed in the forthcoming* IMF World Economic Outlook (by Ravi Balakrishnan, Stephan Danninger, Selim Elekdag and Irina Tytell), to be released later in April. The advanced country financial stress indices (FSI) are a composite of banking sector, interbank spreads, term spreads (described in the October 2008 WEO, Chapter 4). Specifically:

Banking sector: rolling 12-month covariance of the year-over-year percent change of a country’s banking sector equity index and its overall stock market index, divided by the ...

NEW YORK (March 24, 2009)-As the U.S. economic recession intensifies, the Obama administration's recently passed stimulus plan may help stabilize unemployment rates, the housing market and the financial systems, as well as promote growth in new investment areas such as energy efficiency, public infrastructure, and greenhouse gas mitigation through cap-and-trade structures, said leading finance experts at a panel discussion organized by Dow Jones Indexes/STOXX Limited.