Opinion

James Saft

Earnings’ fun-house mirror: James Saft

Apr 30, 2013 12:09 UTC

By James Saft

(Reuters) – U.S. corporate earnings appear as if reflected in a distorting fun-house mirror: profits are huge but revenues strangely shrunken.

Corporate profits have grown strongly, up 2.1 percent among S&P 500 companies reporting first-quarter earnings so far, with 70 percent exceeding analysts’ expectations. At first glance, that looks like a particularly good outcome, especially considering profits compared to the size of the economy are near recent all-time highs. Revenues, however, are falling; down 0.6 percent compared to a year ago, marking the second quarter out of three that cash coming into corporate coffers has shrunk.

Understanding how this unsustainable state came to be and how long it might go on is the key to knowing not just what will happen with stock markets but perhaps with the economy itself.

So, how are companies keeping more and more of the less and less in revenues that flows in their doors? In part through efficiency, but in part the old-fashioned way: by not investing for the future.

Historically profits and investments have been fairly tightly connected, with companies seeing high margins as a signal to invest in new capacity and make more. The extra capacity from the investment means more competition, which in turn drives down margins.

Column: BRICs hit the wall – restructure, or recycle?

Apr 25, 2013 19:55 UTC

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

By James Saft

(Reuters) – It may be time for emerging market investors to acknowledge the truth: the problem is not just cyclical, it is structural.

One of the puzzles of recent months is the underperformance of emerging markets compared to the rather more sclerotic and central-bank dependent developed world. Thus far this year emerging market stocks are down about 6.5 percent and trail developed market indices by a full 11 percentage points.

Given that growth in emerging markets seems to have bottomed late last year, you would normally expect the reverse, accompanied by strong commodity markets prices and supportive central bank policy.

Apple, the Fed and the financial fallacy

Apr 24, 2013 19:14 UTC

By James Saft

(Reuters) – Apple’s emphasis on share buybacks is a strikingly similar error to the Federal Reserve’s dedication to buying U.S. Treasuries.

Call it the financial fallacy, the modern tendency to concentrate on the often ephemeral movement of numbers on traders’ screens rather than the much harder to manage real world.

Both institutions are reacting to deteriorating fundamentals by concentrating their firepower on influencing securities markets.

The next crisis: Fed promised, Fed delivered – James Saft

Apr 23, 2013 12:01 UTC

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

By James Saft

(Reuters) – Don’t say you weren’t warned.

The next crisis is coming, driven on by Federal Reserve policy which in seeking to keep inflation and employment on target will also breed financial instability.

Don’t take my word for it – this is all straight from Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, who last week laid out his thinking on why low rates will be needed for years to come and what the side-effects will be.

“I’ve suggested that it is likely that, for a number of years to come, the Federal Open Market Committee will only achieve its dual mandate of maximum employment and price stability if it keeps real interest rates unusually low,” Kocherlakota said in a speech in New York.

Oh no, they are saying it’s different this time

Apr 18, 2013 20:42 UTC

By James Saft

(Reuters) – You never like to see the words “inflation,” “central banks” and “it’s different this time” in close proximity to each other.

That, however, is the essential message in the International Monetary Fund’s World Economic Outlook, which argues that the relationship between unemployment and inflation may have fundamentally changed.

What’s more, the IMF is giving credit to central banks, which it says have inspired new confidence in their ability to control inflation.

Meditation and the art of investment

Apr 17, 2013 20:29 UTC

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

By James Saft

(Reuters) – From Ray Dalio to Bill Gross, some of the biggest names in money management are practicing meditation.

At a conference last week in Washington, Dalio expounded on how his practice of meditation has helped his investment performance. Georgetown University, at the same conference, announced it would begin to offer a semester-long class on the discipline at its graduate business school. (link.reuters.com/kav47t)

While money managers often joke that clients are the biggest impediment to beating the market because they make emotional mistakes, the truth is that all investors, big and small, share traits which get in the way of making the best choices.

SAFT ON WEALTH: Meditation and the art of investment

Apr 17, 2013 20:28 UTC

April 17 (Reuters) – From Ray Dalio to Bill Gross, some of
the biggest names in money management are practicing meditation.

At a conference last week in Washington, Dalio expounded on
how his practice of meditation has helped his investment
performance. Georgetown University, at the same
conference, announced it would begin to offer a semester-long
class on the discipline at its graduate business school. ()

While money managers often joke that clients are the biggest
impediment to beating the market because they make emotional
mistakes, the truth is that all investors, big and small, share
traits which get in the way of making the best choices.

Gold’s fall not a harbinger of happy days: James Saft

Apr 16, 2013 12:07 UTC

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

By James Saft

(Reuters) – Just as gold’s rise never showed the policies of central banks to be a failure, so its fall cannot show they have succeeded.

Yes, the attraction to gold is driven by mistrust, its principal virtue being that, unlike currencies, it can’t be created at will. No, the massive sell-off over two days in gold is not a sign that trust is back and policy-makers can soon declare victory over the crisis and make plans for restoring a more normal balance of policy.

Monday marked the second day of gold’s worst two-day tumble since 1983, as it fell more than 9 percent amid huge volumes, taking its total losses since Friday to 14 percent.

Insider trading – all the cool kids are doing it

Apr 11, 2013 21:07 UTC

By James Saft

(Reuters) – There are a bunch of kids out there trading on inside information, and you, me and the rest of the economy are paying the price.

A study of trading patterns in Finland shows a highly suspicious pattern of activity in accounts held on behalf of juveniles.

In reality, it is probably not the kids themselves who are playing at being junior insider traders, but instead it is their guardians who are likely using juvenile accounts as a safer way to profit from non-public knowledge.

SAFT ON WEALTH: Insider trading – all the cool kids are doing it

Apr 11, 2013 21:03 UTC

April 11 (Reuters) – There are a bunch of kids out there
trading on inside information, and you, me and the rest of the
economy are paying the price.

A study of trading patterns in Finland shows a highly
suspicious pattern of activity in accounts held on behalf of
juveniles.

In reality, it is probably not the kids themselves who are
playing at being junior insider traders, but instead it is their
guardians who are likely using juvenile accounts as a safer way
to profit from non-public knowledge.

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