James Saft

By James Saft

(Reuters) – Quantitative easing may well be pushing investors to hold more cash rather than risk assets, blunting its impact as monetary policy.

Known as the portfolio rebalancing channel, the thinking behind QE rests partly on the assumption that buying up government bonds will drive interest rates down and entice investors to tilt their holdings towards riskier investments like stocks. That in turn is supposed to goose investment and consumption.

Unfortunately, that assumption may be running afoul of, or fouling up, the way in which most investors construct their portfolios, according to Toby Nangle, head of multi-asset investments at London-based Threadneedle Investments.

He argues, convincingly, that by driving rates to rock-bottom levels, government debt can no longer properly play its role as ballast in an overall portfolio, steadying the ship and allowing investors to take on more risk than they otherwise would dare.

“Despite working in asset management for sixteen years, I have never met a major, sophisticated, institutional end-investor who did not believe (with a good degree of confidence) that on a five-year horizon stocks outperform bonds,” Nangle writes in a note to clients. (here)

May 16 (Reuters) – Quantitative easing may well be pushing
investors to hold more cash rather than risk assets, blunting
its impact as monetary policy.

Known as the portfolio rebalancing channel, the thinking
behind QE rests partly on the assumption that buying up
government bonds will drive interest rates down and entice
investors to tilt their holdings towards riskier investments
like stocks. That in turn is supposed to goose investment and
consumption.

Unfortunately, that assumption may be running afoul of, or
fouling up, the way in which most investors construct their
portfolios, according to Toby Nangle, head of multi-asset
investments at London-based Threadneedle Investments.

May 15 (Reuters) – The possible coming rebirth of U.S.
manufacturing might turn out to be the most important investment
story of the next decade, up-ending the winners and losers of
the former world order.

The U.S.’s share of global manufacturing output fell by 23
percent in the 40 years to 2010, as China rose, outsourcing
boomed and a new highly integrated global supply chain was born.
This has utterly remade the U.S. and global economies, affecting
everything from how much and how U.S. workers make money to how
most companies are organized and compete.

Now a combination of factors – from cheap U.S. energy to new
technology to a falling wage gap – may partly reverse some of
those changes, bringing some manufacturing back on-shore.

By James Saft

(Reuters) – Buy Japanese stocks if you must but don’t expect Abenomics and the fall of the yen to revitalize Japan’s economy.

The yen has fallen by more than 20 percent since Prime Minister Shinzo Abe, who advocates aggressive monetary and fiscal policy, was elected in December, busting through the 100 yen to the dollar level last week.

In part the theory behind Abenomics is that a weaker yen will revitalize industry, which will export more and plow the proceeds into hiring and capital investment.

NEW YORK (Reuters) – This is not your parents’ bull market.

In fact, your dad and mom very may well have abandoned the market entirely. That could be the single best indicator that stocks have room to run.

The Dow Jones industrial average closed above 15,000 for the first time on Tuesday, the same day the S&P 500 made its all-time high for the fourth consecutive trading session.

You can argue all you like about how corporate profits are vulnerable and the market is hung from the clouds on slender threads spun by Ben Bernanke, but what you can’t say is that we are in classic broad-based stock market mania.

NEW YORK, May 8 (Reuters) – This is not your parents’ bull
market.

In fact, your dad and mom very may well have abandoned the
market entirely. That could be the single best indicator that
stocks have room to run.

The Dow Jones industrial average closed above 15,000 for the
first time on Tuesday, the same day the S&P 500 made its
all-time high for the fourth consecutive trading
session.

You can argue all you like about how corporate profits are
vulnerable and the market is hung from the clouds on slender
threads spun by Ben Bernanke, but what you can’t say is that we
are in classic broad-based stock market mania.

May 7 (Reuters) – Britain may well come to regret the
exceptionally long gap between Governor of the Bank of
England-to-be Mark Carney’s appointment in November and his
first day on the job in July.

Widely seen as a central banking superstar (a role not
without its dangers), Carney is credited with helping to steer
Canada’s economy through the financial crisis and its aftermath
with its banking system and reputation intact.

But one cost of bagging Carney as the successor to Mervyn
King was a very long run-in of more than seven months, during
which Britain has lurched towards and away from recession all
the while giving the impression of an economy more punch drunk
than strengthening.

By James Saft

(Reuters) – Britain may well come to regret the exceptionally long gap between Governor of the Bank of England-to-be Mark Carney’s appointment in November and his first day on the job in July.

Widely seen as a central banking superstar (a role not without its dangers), Carney is credited with helping to steer Canada’s economy through the financial crisis and its aftermath with its banking system and reputation intact.

But one cost of bagging Carney as the successor to Mervyn King was a very long run-in of more than seven months, during which Britain has lurched towards and away from recession all the while giving the impression of an economy more punch drunk than strengthening.

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.

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.