Worthwhile Reading - April 6th

A tale of two depressions. Barry Eichengreen and Kevin O'Rourke, voxeu.

Beijing's 'legless' stimulus. Victor Shih, WSJ Asia.

Mayo gives banks underweight rating on loan losses. Bloomberg.

53% of high-yield companies to default over next 5 years. Jim Reid, Deutsche Bank, via Tyler Durden, Zero Hedge.

Transcript: Meredith Whitney interview. Forbes.

Ontario Teachers' crashes and burns in 2008. Pension Pulse.

One in 10 Americans gets help from U.S. to buy food. Reuters.

The pricing of investment grade credit risk during the financial crisis. Joshua Coval (Harvard), Jakub Jurek (Princeton) and Erik Stafford (Harvard).
they conclude:
This paper has investigated the pricing of investment grade credit risk during the financial crisis. Many analysts appear to be looking at large recent price changes and concluding that we must be witnessing distressed pricing and widespread market failure. This conclusion is based on intuition that fails to appreciate the extreme nonlinearity in the risks of credit securities, especially those manufactured by securitization (i.e. CDO tranches). Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its volatility, and an improved investor appreciation of the risks embedded in these securities. From this perspective, policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay - and perhaps even worsen - the day of reckoning.

Textron up on takeover speculation. Zero Hedge.