As such, I'll be pulling out just a few of the "Must Read" articles and posting a quick caption on their importance. I'll try to do this mid-week as it is warranted.
Must Read Articles of the past week:
A Contrarian View of China - Corriente Advisors (hat tip reader Roger)
Corriente gives an in-depth but easy to read presentation on the state of affairs in China. The consensus of China's situation (plenty of savings, solid growth, booming domestic market, etc) is incredibly one sided. And this report tears many of those misconceptions to shreds. As we know, the consensus is rarely right - especially on matters as opaque as China's debt and currency markets. I find their take compelling.
Debt and Deleveraging - McKinsey (ht Rolfe Winkler)
Lengthy and Exhaustive, a team of researchers has compiled a list of more than 40 historical examples of deleveraging across many countries since the Great Depression. As the title suggests, McKinsey believes our excessive debt levels will result in a prolonged period of deleveraging. But they go one step further and attempt to identify precisely which sectors within the various economies are most likely to undergo this process. They argue that among four primary ways to deleverage (austerity, inflation, default, and growth) we are most likely to take the most common among them - which is austerity. I think default is a higher probability than they're willing to admit. Well worth the read - if only for the intro (pp 9-17).
A Measurement of the Economy - Annaly Capital Management
Annaly challenges the wisdom of relying on GDP for an accounting of the nation's health. They prefer to look at "what the nation earns, rather than what it spends." I agree with this, as it cannot be exogenously influenced as easily. With this metric, they look at tax receipts and conclude that a recovery is unlikely until people start producing, and thus earning, more.
To us, a rebound in GDP only reflects a rebound in consumption, and today’s consumption is fueled to a large extent by growth in government spending, incentives and, most significantly, borrowing. A rebound in tax receipts, sans tax increases that stymie economic activity, would reflect growth in our country’s earning power.
Option-ARM Update - Calculated Risk
As the title suggests. A short recap of what's to come for recasting Option ARM mortgages - which in most instances were just as poorly underwritten as subprime mortgages.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.