Opinion

James Saft

Bonds swamped in fair weather or foul

May 29, 2009 09:07 UTC

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Come good news or bad, the U.S. treasury market is taking a sell now and wait for inflation later strategy.

Since May 21, Treasuries have been battered, sending the yield on 10-year bonds up by nearly 40 basis points to 3.53 percent, an enormous move in bond market terms.

This is where the real action is, not in speculation about whether credit ratings agencies will cut the U.S. AAA rating in a year or two; by the time they get around to saying what everyone already knows is true, the damage will have been done.

The U.S. is in the process of reflating, really re-leveraging its economy, but this time using the public purse and printing machine to replace private demand.

The ugly attraction of fast shrinking Japan

May 21, 2009 11:44 UTC

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Sure, seeing your economy shrink at a 15 percent annual clip is depressing, quite literally, but if you believe in even a tepid global economic recovery in the second half, then Japan is actually attractive.

There is no way to sugar coat the first quarter Japanese gross domestic product figures released on Wednesday: they are breathtakingly bad viewed from virtually any angle.

Pension funds should ditch alpha and cut fees

May 13, 2009 09:16 UTC

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

If anyone has reason to pray that the current equity rally holds, it is the world’s active fund managers who need investors to return to the folly of betting on outperforming the markets rather than the uninspiring but reliable business of cutting costs.

Pension funds, particularly those where the employer bears most of the risk of making good on promised payouts, are hurting after more than a decade of poor market returns.

Bond markets give stress test thumbs down

May 8, 2009 17:19 UTC

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The most revealing verdict on the results of the U.S. banking stress test was delivered not by shareholders but by the vigilantes of the bond market, who shunned an auction of 30-year government debt.

This makes sense: if the U.S. is letting banks off too lightly it will be taxpayers and the people who lend the U.S. money who will have to pick up the bill.

from Neil Collins:

Don’t bet that RBS is cheap

May 6, 2009 12:10 UTC

Once upon a time, when the problems in the credit markets were little more than an awkward lump in the inter-bank rates, and Northern Rock looked like a bizarre aberration, Royal Bank of Scotland shares cost over four pounds apiece. Today, even after the rush for rubbish that has characterised the current share rally, they cost just 50p. Surely they must be cheap?

 Er, well, not exactly. After a rights issue and two government rescues, there are now 56,365,721,284 RBS shares in issue, compared to a mere 10,006,215,087 at the end of 2007. The chart for the market capitalisation of the bank shows a rather different picture to that of the share price. At 50p, today's RBS is valued at 28 billion pounds, which is hardly a giveaway, even if the worst of the provisioning against the dud derivatives and doubtful debts is now past.

 The good news, though, is truly extraordinary. According to Deusche Bank's calculations, the UK government's average cost price for its controlling slice of RBS is 50p a share. This would take a whole year to shift if dribbled out into the market, but (don't laugh) it could give every man, woman and child in the country 500 free shares in RBS, worth 250 pounds, and still leave HMG with plenty left to sell.

A chink of light for the euro zone

May 1, 2009 11:05 UTC

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Even without a huge fiscal boost or a hell-for-leather central bank, Europe could have a recovery, albeit a tepid one, on the cards by the end of the year.

Recent forward looking economic data is still grim, but hides within it the seeds of a rebound, as the absolutely brutal fall in manufacturing over the past six months burns itself out.

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