James Saft

Nov 29 (Reuters) – If U.S. fiscal woes set off a market
downdraft, this time the dollar could actually be a beneficiary.

Negotiations over the “fiscal cliff,” a mix of automatic tax
rises and spending cuts, are ongoing. Though a deal of some sort
will probably be struck, there is a real chance of a
market-toxic outcome.

Stocks, of course, would suffer and Treasuries
rally, even if an inability to strike a credible
deal over the fiscal cliff makes the United States as a borrower
look, well, a bit lame.

Particularly dangerous, at least for equities, would be any
chain of events which ends with another downgrade of the U.S.
credit rating.

The lack of other credible safe havens means the dollar
should actually rally.

“When you remove the majors from safe-haven status, the
dollar has to benefit no matter where the trouble comes from,”
said Adnan Akant, head of foreign exchange at fund manager
Fischer Francis Trees & Watts.

Nov 27 (Reuters) – To understand why the retail sector will
continue to be such an investment minefield consider just two
phrases: Black Friday and Cyber Monday.

The latter, the mock tradition of buying stuff online when
the boss isn’t watching on the Monday after Thanksgiving, is
emblematic of the forces challenging a retail industry much of
which was built for a U.S-centered cars, parking lots and box
store paradigm which makes less and less sense every day.

Black Friday began to be so called in the 1980s because it
marks the kick-off of the holiday shopping season during which
retailers are thought to move from the red ink of annual loss
into the black of profit.

Nov 20 (Reuters) – Like a hangover that starts before you
even go to bed, the fact that the shadow banking system has
expanded since the crisis bodes poorly for what comes in the
morning.

Shadow banking, financial intermediation done in such a way
as to elude regulations imposed on traditional banks, has
actually grown since the onset of the financial crisis in 2007
and stands at $67 trillion worldwide, according to a new
accounting from the Financial Stability Board.

That’s hard to square with assumptions that investors, stung
by losses caused by a run on assets in shadow banking during the
crisis, have learned their lesson, much less that economic
growth is being crimped in part by falling credit and money
creation by shadow lenders.

Nov 16 (Reuters) – Every investor, sadly, has to be a Fed
watcher given that U.S. asset markets are supported, if not
levitated, by quantitative easing.

Sadly because, and Ben Bernanke himself might agree with
this, we could all probably find more productive ways to spend
our time. Sad, too, because the Federal Reserve’s reach actually
seems to be diminishing amid doubts about how well QE is
working.

Perhaps never before has the market been this dependent on
the Fed and perhaps never before has there been as much doubt
over its eventual success.

By James Saft

(Reuters) – With earnings data now looking decidedly glum, the market may have more immediate things to fear than rising tax rates and falling government spending.

The S&P 500 is down more than 9 percent from its October peak, and about 4.5 percent since election day, prompting much debate over the impact of the impending fiscal cliff, which may hit the economy, and potentially rising rates of taxes on income, dividend and capital gains taxes.

Albert Edwards, the bearish but often prescient strategist at Societe Generale in London, thinks things are quite a bit more simple than that.

Nov 13 (Reuters) – Japan is shrinking again and its
government thinks the answer lies in more of the same policy the
Bank of Japan has been unsuccessfully implementing for 17 years.

Japan’s economy contracted by 0.9 percent in the third
quarter, data showed on Monday, reversing earlier quarters of
growth and taking the country into a nosedive equating to a 3.5
percent annual decline.

Inevitably, this has economists and policy-makers fretting
over whether Japan is sinking into a recession, technically
defined as two successive quarters of economic contraction.

By James Saft

(Reuters) – Banking shares are down sharply since the election, but the threat of tough regulation now moving markets might hold a kernel of hope for investors.

The re-election of Barack Obama and the victory of several high-profile supporters of tough financial regulation – notably Massachusetts Senator-elect Elizabeth Warren – have cemented expectations of an increasingly difficult operating environment.

Although not far off 52-week highs, the KBW bank index is about 4 percent lower than just before the election. Morgan Stanley is 8 percent lower, while Citigroup Inc is down about 4 percent.

Nov 7 (Reuters) – Obsess exclusively over the fiscal and
monetary impact of the U.S. election at your peril: the real
news may be coming out of the euro zone.

An election producing a split Congress and a second Barack
Obama term was greeted on Wednesday with a sharp divergence in
financial markets, with stocks falling and Treasuries and the
dollar rallying sharply.

Since most of us in the U.S. have spent nearly every waking
hour in recent weeks being bombarded by news, advertisements,
images, lies, statistics and still more lies it is no wonder
that most analysis of the market is attributing the moves to the
election’s implications.

Nov 6 (Reuters) – While the world is transfixed by the
outcome of the U.S. elections, the euro zone is busily imploding
economically.

And this time the difficulty isn’t so much being driven by
the troubles in Greece, Spain and elsewhere but is reflecting a
stark underlying weakness which will complicate already thorny
structural problems. Recent data on bank lending – still central
to the European economy – shows an old-fashioned, flat-out
recession deepening, with banks and borrowers both backing away
from credit as quickly as their little legs will carry them.

The situation cries out for action to weaken the euro from
the European Central Bank, which is widely expected to do
exactly nothing at its policy meeting this Thursday. Perhaps the
only good news is that the markets, recognizing the issues, are
trading the value of the euro lower, making some slight
difference in competitiveness and external demand.

By James Saft

(Reuters) – The New York Yankees and their aging and highly paid third baseman Alex Rodriguez illustrate a problem all investors face and few completely conquer: sunk costs.

You too, like the Yankees, probably own a security you paid more for than it is now worth, and you too may well find it perplexingly hard to sell and accept your loss.

Rodriguez, for those of you who don’t follow baseball, is a likely hall of famer whose skills, at least based on the statistical record, have slipped sadly recently. Things came to a head in the baseball playoffs when the Yankees benched Rodriguez, the man they will pay $29 million in 2012.