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.

• Richard Thaler (Financial Times): Markets can be wrong and the price is not always right, August 4, 2009. The “efficient market hypothesis” has been a fact of life for economists. Among other things, it says that asset prices will fully reflect available information; and that it is hard for any investor to beat the market after taking risk into account. Has the last year changed how it is viewed.

• Eric Uhlfelder (Advisor Perspectives): Paul Krugman on prospects of recovery, August 4, 2009.

• Economist.com: A concrete problem, July 30, 2009. Banks face another round of property-related bad debts: this time it will be flashy offices, not rundown homes.

• Frank Hornig,

A batch of gloomy economic reports during the past few days suggested that recent optimism about a global recovery might have been premature. This caused Doug Kass to warn that “stock prices have moved ahead of fundamentals” and Kenneth Langone to caution that “investors seem to be getting ahead of themselves”, although he maintained that the long-term outlook on the market was positive.

Big banks across the US announced large common stock offerings and plans to repay the government, and the US administration attempted to bring transparency to the credit derivatives markets and also crack down on the credit card industry.

In addition to Kass and Langone, commentators featured on camera in this post include Elizabeth Warren, Meredith Whitney, Alan Greenspan, Peter Boockvar, Giles Keating, Jim Rogers, Barry Ritholtz, Dennis Gartman, Abby Cohen, Peter Eliades and Laszlo Birinyi.

The

...and the Financial and Economic Crisis

I don't read very many books. At least not during the academic year. But I have read two books recently that are quite germane to thinking about the buildup to the financial crisis, and thinking about how to respond to the current economic downturn. The first is Akerlof and Shiller's Animal Spirits. The second one is actually not yet out -- it's Justin Fox's The Myth of the Rational Market (I got a prepublication copy; here's a hint of it). They are both important books, well worth reading.

As one can guess from the titles of these two books, neither text is a paean to the predictive power of the neoclassical view of the world. I'd expect that most readers trained in this tradition would then skip this blogpost. But before you do, and go back to reading your financial industry newsletter, you