Opinion

James Saft

China hasn’t got investors’ backs: James Saft

Sep 16, 2014 04:07 UTC

By James Saft

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

In a world in which investors increasingly assume policy-makers have their backs, China may be about to demonstrate how it can work the other way.

Chinese growth is decelerating sharply from sky-high levels, with August industrial production slipping to a 6.9 percent growth rate not seen since the crisis year of 2008 amid a broad-based slowdown in the kind of fixed investment which has traditionally powered its economy.

This makes the official government target of 7.5 percent annual economic growth look a vain hope, with economists rapidly ratcheting down their forecasts.

Yet despite this, there are signs that China will refrain from wholesale stimulative moves to jumpstart growth, a policy it has followed in past growth lulls and one which many investors have assumed acts as a sort of ‘get out of jail free card’ backstopping their speculations.

China hasn’t got investors’ backs: James Saft

Sep 16, 2014 04:01 UTC

Sept 16 (Reuters) – In a world in which investors
increasingly assume policy-makers have their backs, China may be
about to demonstrate how it can work the other way.

Chinese growth is decelerating sharply from sky-high levels,
with August industrial production slipping to a 6.9 percent
growth rate not seen since the crisis year of 2008 amid a
broad-based slowdown in the kind of fixed investment which has
traditionally powered its economy.

This makes the official government target of 7.5 percent
annual economic growth look a vain hope, with economists rapidly
ratcheting down their forecasts.

Never confuse risk and volatility

Sep 10, 2014 20:27 UTC

By James Saft

(Reuters) – Of the many lazy and dangerous ways of thinking about investment these two rank near the top: that risk equates with volatility and that risk and rewards are a straight tradeoff.

Both are overly simplistic and both lie at the heart of some of the most colossal errors in recent finance. And while both contain large amounts of truth at their core, both concepts represent shorthand versions of reality rather than tools which always, or even usually, work.

In financial theory, volatility, the amount a security goes up and down in price, is used more or less interchangeably with risk, something hedge fund giant Howard Marks argues is mostly because volatility can be reduced to a number.

Scotland and de-globalization: James Saft

Sep 9, 2014 04:01 UTC

Sept 9 (Reuters) – The prospect of Scottish independence is
further evidence that the era of increasing globalization, with
all its benefits to capital, is waning fast.

Support for independence, an issue to be put to a vote among
Scots on Sept. 18, has surged in recent days, with those in
favor registering their first opinion poll lead over the
weekend.

Not only would an independent Scotland have to come up with
some plan for a currency and monetary policy, an area in which
it has several options, each carrying its own dangers, but it
also would make more likely a British exit from the European
Union.

ECB policy is carry-trade-tastic: James Saft

Sep 4, 2014 21:08 UTC

Sept 4 (Reuters) – For all the uncertainty around the
European Central Bank’s extraordinary monetary policy, one thing
is for sure: it’ll be good for carry trades.

If an asset has a higher yield than euro-denominated ones,
and in today’s world many, many do, it will benefit from
increased flows from investors borrowing in euros and making
bets elsewhere. Notable beneficiaries will be emerging markets,
but the fun hardly stops there.

The ECB on Thursday made a slate of moves to react to
weakening growth in the euro zone. Three policy rates were cut
by 10 basis points, leaving the deposit facility at negative 20
basis points, in a move the ECB signaled was the end of the road
for conventional easing.

Column: Demographics and the bond market conundrum

Sep 3, 2014 21:00 UTC

By James Saft

(Reuters) – As we get older we become curiously susceptible to arguments that it is not us who have changed, but the world.

So it may be with the so-called bond market conundrum, in which the effect of our aging demographics gets very little attention despite likely having considerable impact.

As it was in 2005 when a puzzled Alan Greenspan made the idea of the conundrum popular, the issue today is a divergence between longer-dated Treasuries, which are falling in yield, and monetary policy, which is tightening. If the Federal Reserve had control over the bond market – itself a questionable idea – this should not be happening.

Demographics and the bond market conundrum

Sep 3, 2014 20:57 UTC

Sept 3 (Reuters) – As we get older we become curiously
susceptible to arguments that it is not us who have changed, but
the world.

So it may be with the so-called bond market conundrum, in
which the effect of our aging demographics gets very little
attention despite likely having considerable impact.

As it was in 2005 when a puzzled Alan Greenspan made the
idea of the conundrum popular, the issue today is a divergence
between longer-dated Treasuries, which are falling in yield, and
monetary policy, which is tightening. If the Federal Reserve had
control over the bond market – itself a questionable idea – this
should not be happening.

Russia tensions may help cut knot on euro zone policy: James Saft

Aug 28, 2014 21:12 UTC

Aug 28 (Reuters) – New tensions in Ukraine, which has
accused Russia of further incursions, may serve to light a fire
under efforts to bring looser monetary and fiscal policies to
the euro zone.

While Russia has denied the allegations, NATO on Thursday
said that well over 1,000 Russian troops were now inside Ukraine
in what would represent a large increase.

This makes more likely some interruption of Russian energy
shipments this winter and will exacerbate the economic effects
of sanctions both sides are imposing on one another.

Serving clients, not beating markets

Aug 27, 2014 20:17 UTC

Aug 27 (Reuters) – It may be that the future of wealth
management lies not in beating the market but in helping the
client beat her true opponent: herself.

The traditional offering of the investment management
industry – putting people into products which outperform – is
under siege, hit by a trend of dwindling relative performance
and massive defections of money to passive index-based
strategies and products.

Charles Ellis, an eminence grise of index investing and the
founder of Greenwich Associates, argues that the combination of
falling fees for active management and the continued flow of
funds into index products is going to challenge the economics
and structure of the investment industry as we know it.

Draghi calls for fiscal help, hears busy signal: James Saft

Aug 26, 2014 04:01 UTC

Aug 26 (Reuters) – It may well be a big deal that Mario
Draghi is now talking fiscal stimulus, but the unlikeliness of
this happening only underscores that he’ll be forced to do more
with monetary policy.

The European Central Bank president delivered a
ground-breaking speech at Jackson Hole, calling for government
spending to do more of the heavy lifting of bringing idled
workers back on the job while acknowledging that, his previous
excuses aside, market prices show he is losing the battle
against falling inflation.

All of this is refreshing, and would be highly encouraging
but for some pesky realities.

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