Opinion

James Saft

Ireland, debt and democracy risk

Mar 6, 2012 15:09 UTC

By James Saft

(Reuters) – Ireland’s decision to hold a popular vote on Europe’s new fiscal treaty adds some unpredictable and much-needed risk to the seemingly inevitable course of the euro bailout steamroller.

While turkeys have on occasion voted for Thanksgiving, especially if told a “no” vote will only bring the feast day forward, Irish voters have reason to be furious and also have a strong track record of rejecting euro zone initiatives.

Ireland can’t by itself block the treaty, which will come into force if adopted by a quorum of 12 European Union states, but a rejection can, and just might, serve as a rallying point for those disaffected by the crisis resolution process.

Ireland would, however, find itself unable to access support from the European Stability Mechanism, a sort of permanent euro zone bailout fund that comes into effect in 2014. As Ireland is now receiving aid from the existing fund, such a vote would massively raise the risks of holding Irish debt.

“We expect Ireland to face challenges regaining market access in 2013 and it will likely need to rely on the ESM, at least partially, when the current support program expires,” Moody’s credit rating analysts Dietmar Hornung and Matt Robinson wrote in an analysis following the announcement.

The wisdom of exercising patience in investing

Mar 2, 2012 12:41 UTC

By James Saft

(Reuters) – “Don’t just do something, stand there!” might just be the best least-followed advice in investing.

If there is one statistic that is, if anything, more depressing than the last empty decade of equity returns it is the fall and fall of average stock holding periods.

While the average holding period of a NYSE-traded stock was 10 years in the late 1930s the trend since 1995 has been down and down, driven by ever more frenetic trading. By 2010 the length of time the average share is held is down to a mere six months, according to NYSE data, a real testament to the eternal triumph of hope over experience.

SAFT ON WEALTH: The wisdom of exercising patience

Mar 1, 2012 21:11 UTC

March 1 (Reuters) – “Don’t just do something, stand
there!” might just be the best least-followed advice in
investing.

If there is one statistic that is, if anything, more
depressing than the last empty decade of equity returns it is
the fall and fall of average stock holding periods.

While the average holding period of a NYSE-traded stock was
10 years in the late 1930s the trend since 1995 has been down
and down, driven by ever more frenetic trading. By 2010 the
length of time the average share is held is down to a mere six
months, according to NYSE data, a real testament to the eternal
triumph of hope over experience.

Private money flees Portugal

Mar 1, 2012 16:11 UTC

By James Saft

(Reuters) – The most telling thing the ECB did on Wednesday’s leap day wasn’t the 530 billion euros in party favors they handed out to banks, but rather the paltry sum they were forced to commit to shoring up Portugal’s government bond market.

Around 800 euro area banks availed themselves of the three-year loans offered by the European Central Bank, money many analysts expected to be recycled into euro area government bonds. It was a clever plan: keep the banks alive with easy money and they in turn will support the ailing governments on Europe’s periphery, pocketing the spread.

It doesn’t seem to be working out that way, at least in Portugal’s case. Portuguese borrowing rates have remained stubbornly high and on Wednesday spiked higher, with 10-year borrowing rates above 13 percent. That brought the ECB into the market to make its first purchases of government bonds in two weeks.

  •