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

• Richard Beales (The New York Times): Exuberance defies sober new reality, September 17, 2009. Is irrational exuberance back in the markets? Evidence abounds that it may be. With financial chaos abating, the return of risk appetite in stock and lending markets is logical - up to a point. But risk-taking that aspires to the boom-time norm, rather than a more sober new reality, could be premature and dangerous.

• James Grant (The Wall Street Journal): From bear to bull, September 19, 2009. Grant argues the latest gloomy forecasts ignore an important lesson of history: The deeper the slump, the zippier the recovery.

• John Hussman (Hussman Funds): Strenuously overbought, September 22, 2009. Our measures of market action

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“Words from the Wise” this week comes to you in a shortened format as I do not have access to my normal research resources while on the road in Europe (also see my post “Gone A.W.O.L. - to Slovenia and Switzerland“). Although very little commentary is provided, a full dose of excerpts from interesting news items and quotes from market commentators is included.

While investors’ hopes of an economic recovery might have got ahead of reality, the cartoonists continually reminded us of worrisome issues …

Source: Signe Wilkinson, Washington Post,  June 18, 2009.

The past week’s performance of the major asset classes is summarized by the chart below - a mixed bag so to speak.

Source: StockCharts.com

A summary of

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by Edward Hugh: Barcelonabr /br /Well that so called investor "risk appetite" took a surprise hit yesterday (and from an unexpected quarter). It wasn't the worries about US fiscal deficits that caused the panic, but problems in the European banking system. a href="http://ftalphaville.ft.com/blog/2009/06/16/57171/investor-fears-cut-risk-appetite/"Gwen Robinson reports/a:br /br /blockquoteRisk appetite suffered a sharp deterioration on Monday as fresh uncertainty about the global economy prompted investors to shift from equities, commodities and emerging market assets into the perceived safety of government bonds and the dollar. Markets were further unnerved by warnings on the economic outlook from the head of the IMF and an ECB report saying eurozone banks face another $283bn in writedowns on bad loans and securities this year and next./blockquotebr /As Izabella Kaminska notes, a href="http://www.facebook.com/ext/share.php?sid=117027956538h=wHY-pu=bc40uref=nf"it is Southern Europe that is now getting all the attention/a.br /br /blockquoteThis time it’s the turn of 25 Spanish banks, all of whose senior ratings ...

In “Hollowing Out, Tokyo Style,” FT Alphaville’s Gwen Robinson does a fine job of capturing an ongoing, and now accelerating human resources conundrum. While it seems like there’s no shortage lately of fake Japundits (not to be confused with the real Japundit, who is simply trying to keep it real on the cultural front) saying to go long Japanese stocks, boots-on-the-ground evidence provides further insight into the opaque. First, the positives: “You know when the big guys like Goldman and Lehman cut their small cap teams that we’ve reached the bottom - you have to think, it’s got to be upwards from here”. [FTA’s quoting of an expat broker] Also, the fact that Japan-focused hedge funds have been hammered (FTA cites Eurekahedge: AUM contraction in 2007 of $10.9B due to poor performance including $7.7B of redemptions) and ...