Opinion

James Saft

Column: An extraordinary summer

May 2, 2013 19:51 UTC

By James Saft

(Reuters) – Put away the sunblock and beach towels, for central bankers this is going to be yet another summer of extraordinary measures.

Major central banks around the world, struggling with low growth and sagging inflation, seem to be moving towards joining their peers at the Bank of Japan in considering even more radical measures to stimulate growth.

The European Central Bank on Thursday cut interest rates and threw out broad hints about a range of unconventional measures it may pursue, without committing to anything specific. Europe’s central bank also cut its main interest rate by 25 basis points to 0.50 percent and lopped a half a percentage point off of its marginal lending facility, taking it to 1 percent.

On Wednesday the Federal Reserve kept rates on hold but inserted a key phrase into its statement which opened the door to increased or decreased bond buying if needed. While the Fed, which is divided on the need for and wisdom of more quantitative easing, or QE, was careful to keep its options open, the significant change was that it was for the first time in recent months discussing the possibility of doing more.

Despite buoyant stock markets and giddy debt markets, the global economy is in a clearly weakened state and getting worse.

Column: Rwanda, iBonds and the madness of the bond market

May 1, 2013 18:08 UTC

By James Saft

(Reuters) – In the past week we’ve had two object lessons in the madness of the bond market: Rwanda and Apple.

Apple Inc, maker of the ubiquitous iPhone and iPad, on Tuesday sold $17 billion of bonds, the largest-ever corporate issue, at rates of interest barely discernible with the naked eye.

Also recently, Rwanda issued a debut $400 million Eurobond in a sale that was heavily oversubscribed. As the market has taken to calling Apple’s issue iBonds, you could easily call Rwanda’s 10-year offering aidBonds, as foreign aid is one of the largest sources of government revenue for the tiny African country.

SAFT ON WEALTH: Rwanda, iBonds and the madness of the bond market

May 1, 2013 18:01 UTC

May 1 (Reuters) – In the past week we’ve had two object
lessons in the madness of the bond market: Rwanda and Apple.

Apple Inc, maker of the ubiquitous iPhone and iPad,
on Tuesday sold $17 billion of bonds, the largest-ever corporate
issue, at rates of interest barely discernible with the naked
eye.

Also recently, Rwanda issued a debut $400 million Eurobond
in a sale that was heavily oversubscribed. As the
market has taken to calling Apple’s issue iBonds, you could
easily call Rwanda’s 10-year offering aidBonds, as foreign aid
is one of the largest sources of government revenue for the tiny
African country.

Earnings’ fun-house mirror: James Saft

Apr 30, 2013 12:09 UTC

By James Saft

(Reuters) – U.S. corporate earnings appear as if reflected in a distorting fun-house mirror: profits are huge but revenues strangely shrunken.

Corporate profits have grown strongly, up 2.1 percent among S&P 500 companies reporting first-quarter earnings so far, with 70 percent exceeding analysts’ expectations. At first glance, that looks like a particularly good outcome, especially considering profits compared to the size of the economy are near recent all-time highs. Revenues, however, are falling; down 0.6 percent compared to a year ago, marking the second quarter out of three that cash coming into corporate coffers has shrunk.

Understanding how this unsustainable state came to be and how long it might go on is the key to knowing not just what will happen with stock markets but perhaps with the economy itself.

Column: BRICs hit the wall – restructure, or recycle?

Apr 25, 2013 19:55 UTC

(James Saft is a Reuters columnist. The opinions expressed are his own)

By James Saft

(Reuters) – It may be time for emerging market investors to acknowledge the truth: the problem is not just cyclical, it is structural.

One of the puzzles of recent months is the underperformance of emerging markets compared to the rather more sclerotic and central-bank dependent developed world. Thus far this year emerging market stocks are down about 6.5 percent and trail developed market indices by a full 11 percentage points.

Given that growth in emerging markets seems to have bottomed late last year, you would normally expect the reverse, accompanied by strong commodity markets prices and supportive central bank policy.

Apple, the Fed and the financial fallacy

Apr 24, 2013 19:14 UTC

By James Saft

(Reuters) – Apple’s emphasis on share buybacks is a strikingly similar error to the Federal Reserve’s dedication to buying U.S. Treasuries.

Call it the financial fallacy, the modern tendency to concentrate on the often ephemeral movement of numbers on traders’ screens rather than the much harder to manage real world.

Both institutions are reacting to deteriorating fundamentals by concentrating their firepower on influencing securities markets.

The next crisis: Fed promised, Fed delivered – James Saft

Apr 23, 2013 12:01 UTC

(James Saft is a Reuters columnist. The opinions expressed are his own.)

By James Saft

(Reuters) – Don’t say you weren’t warned.

The next crisis is coming, driven on by Federal Reserve policy which in seeking to keep inflation and employment on target will also breed financial instability.

Don’t take my word for it – this is all straight from Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, who last week laid out his thinking on why low rates will be needed for years to come and what the side-effects will be.

“I’ve suggested that it is likely that, for a number of years to come, the Federal Open Market Committee will only achieve its dual mandate of maximum employment and price stability if it keeps real interest rates unusually low,” Kocherlakota said in a speech in New York.

Oh no, they are saying it’s different this time

Apr 18, 2013 20:42 UTC

By James Saft

(Reuters) – You never like to see the words “inflation,” “central banks” and “it’s different this time” in close proximity to each other.

That, however, is the essential message in the International Monetary Fund’s World Economic Outlook, which argues that the relationship between unemployment and inflation may have fundamentally changed.

What’s more, the IMF is giving credit to central banks, which it says have inspired new confidence in their ability to control inflation.

Meditation and the art of investment

Apr 17, 2013 20:29 UTC

(James Saft is a Reuters columnist. The opinions expressed are his own.)

By James Saft

(Reuters) – From Ray Dalio to Bill Gross, some of the biggest names in money management are practicing meditation.

At a conference last week in Washington, Dalio expounded on how his practice of meditation has helped his investment performance. Georgetown University, at the same conference, announced it would begin to offer a semester-long class on the discipline at its graduate business school. (link.reuters.com/kav47t)

While money managers often joke that clients are the biggest impediment to beating the market because they make emotional mistakes, the truth is that all investors, big and small, share traits which get in the way of making the best choices.

SAFT ON WEALTH: Meditation and the art of investment

Apr 17, 2013 20:28 UTC

April 17 (Reuters) – From Ray Dalio to Bill Gross, some of
the biggest names in money management are practicing meditation.

At a conference last week in Washington, Dalio expounded on
how his practice of meditation has helped his investment
performance. Georgetown University, at the same
conference, announced it would begin to offer a semester-long
class on the discipline at its graduate business school. ()

While money managers often joke that clients are the biggest
impediment to beating the market because they make emotional
mistakes, the truth is that all investors, big and small, share
traits which get in the way of making the best choices.

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