Opinion

James Saft

Buffett hoards cash, individuals’ holdings hit 14-year low

Aug 20, 2014 20:44 UTC

Aug 20 (Reuters) – Individual investors have been cutting
back on cash in portfolios, the exact reverse of what Warren
Buffett has been doing at Berkshire Hathaway.

Who do you think has got it right?

Cash at Berkshire Hathaway stood at just over $55
billion as of June 30, an all-time high and two and a half times
the level he’s in the past said he likes to keep on tap to meet
extraordinary claims at his insurance businesses. That’s also up
more than 50 percent from a year ago.

Buffett’s green pile is in sharp contrast to individual
investors, who’ve cut cash in portfolios to 15.8 percent, a
14-year low, according to the July asset allocation survey from
the American Association of Individual Investors.

To be sure, businesses and individuals hold cash for
different reasons, but Buffett has used Berkshire, in part, as
an investment vehicle through which we can interpret his views
on markets, or at least the prices of some assets in them.

Berkshire, of course, has some difficulties in putting cash
to work not faced by your average dentist or lawyer, in that it
tends to make very large investments and as such may need to be
more patient than smaller fry. So it is quite possible Berkshire
Hathaway is waiting for the right acquisition to come along.

The problem with Jackson Hole: James Saft

Aug 19, 2014 04:01 UTC

Aug 19 (Reuters) – There was a time, and I admit I miss it,
when the August Jackson Hole conference of central bankers got
about as much mainstream attention as a particularly
well-attended chess match.

Those were the good old days, before financialization,
economic crisis and political paralysis gave monetary policy an
arguably too central role in the economy and the allocation of
capital.

This week when central bankers from around the world meet at
the Kansas City Federal Reserve’s conclave at Jackson Hole,
Wyoming, investors and many other people who ought to have
better things to do will pay avid interest to the proceedings.

Equities face hurdles after buyback boom fizzles: James Saft

Aug 14, 2014 20:58 UTC

By James Saft

(Reuters) – Share buybacks by U.S. corporations, a key source of support for equity prices in recent years, are slowing, raising questions over why and what it will mean.

Second-quarter buybacks were 20 percent below those in the first quarter among a universe of 700 companies followed by quant analysts at Societe Generale, and are now lower than they were in the second quarter of last year. In a broader universe followed by S&P Dow Jones Indices, buybacks fell 30 percent in the second quarter compared to the first.

Given that the S&P 500 index ended the quarter more than 20 percent up on a year before, it is clear we are now experiencing a diminishing effect from share buybacks, something which may well test comfortable assumptions about share valuations.

The better investors get, the less it avails them

Aug 13, 2014 21:04 UTC

Aug 13 (Reuters) – The good news is that active investment
managers are almost certainly better than ever.

The bad news is that it matters less and less.

Called “The Paradox of Skill” by Michael Mauboussin, head of
global financial strategies at Credit Suisse, this is the idea
that as the range of skills among players in a given game
narrows, the relative importance in luck in determining outcomes
rises. (here)

In other words, as the poorer players get squeezed out, as
they tend to over time, those with higher skills find fewer
mistakes to exploit.

ECB has an Italy problem, and vice versa: James Saft

Aug 12, 2014 04:09 UTC

By James Saft

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

Italy’s recession is a neat illustration not just of the unrelenting pressure on the European Central Bank to take radical steps to stave off deflation, but of why those steps may well work poorly.

Data last week showed the Italian economy contracting for the second straight quarter in April through June, entering its third recession since 2008, and a possible sign of the early and incomplete effects of sanctions against Russia.

ECB calls in the consultants. Hurrah?: James Saft

Aug 7, 2014 21:11 UTC

Aug 7 (Reuters) – Relax, people, the ECB is going to hire a
consultant.

You might think that the threat of deflation, a recession in
Italy and some alarming signs of slowing growth in key member
states like Germany would call for action from the euro zone
central bank.

But this is Europe, and it’s August, so instead, apparently,
we are waiting for the finishing touches to be put on a contract
for someone to advise the ECB about reforming the asset-backed
securities market so it can stand to buy the bonds.

“The other news is that we are about to hire … a
consultant to help us design this program in the best possible
fashion,” ECB President Mario Draghi told the press conference
after the ECB left rates on hold and announced no new meaningful
initiatives.

Mature tech companies make you want to GOSOBB

Aug 6, 2014 20:42 UTC

Aug 6 (Reuters) – It is hard, often thankless work being a
mature technology company.

New technology threatens existing revenues, making top-line
growth difficult. Employees demand lots of compensation for
forgoing a lottery ticket at a startup.

And investors, they wish you were still young and cute, like
Facebook or better yet Uber.

Abenomics has two problems – consumers and companies: James Saft

Aug 5, 2014 04:01 UTC

Aug 5 (Reuters) – Companies and consumers alike are
declining to play their assigned roles in Abenomics, undermining
Japan’s chances of escaping deflation and economic malaise.

With exports falling, despite a cheap yen, and inflation
sagging again, pressure will be on the Bank of Japan, which
concludes a two-day policy meeting on Friday.

Thus far Abenomics, a mix of extraordinary monetary policy,
fiscal stimulus and longer-term structural reforms, has met with
some early successes, driving inflation and growth higher. But
households, crimped by the failure of income to keep pace with
inflation, are not spending as hoped, as demonstrated by
disappointing June retail sales data released last week, which
showed a year-on-year fall.

Rising rates not always emerging markets poison

Jul 31, 2014 19:58 UTC

July 31 (Reuters) – The taper tantrum was brutal, but rising
rates do not have to mean lousy performance for emerging
markets.

As investors look to the possibility of rising official
interest rates in the U.S. and Britain in the coming year their
expectations are colored by nasty memories of 2013′s taper
tantrum, when bumbled communications by the Federal Reserve
caused Treasury yields to spike and emerging markets to suffer.

Asset performance was both volatile and very poor,
particularly among emerging market countries like India and
South Africa which need to attract capital flows from abroad.

Fed to widen Main St/Wall St gap: James Saft

Jul 30, 2014 20:36 UTC

July 30 (Reuters) – The Federal Reserve carried on its merry
tapering on Wednesday, and though the accompanying statement was
probably rightly viewed as dovish it signals a potential sting
down the road.

For now, Fed policy looks set to continue to support risk
assets, with a less certain and probably less strong impact on
Main Street.

As expected, the Fed cut bond buying by $10 billion per
month, remaining on course to end the program in October.

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