Opinion

James Saft

Slow growth and the knowledge economy: James Saft

Nov 26, 2013 20:00 UTC

Nov 26 (Reuters) – Corporate cash hoarding may simply be an
unintended consequence of the rise and rise of the knowledge
economy.

If true, this may help to explain not only why companies see
fit to pile up mountains of cash, but also why the recovery and
job growth are so weak.

A study published by the Federal Reserve in September tied
the growth of cash on corporate balance sheets to the rise of
so-called intangible capital, things like intellectual property
or the processes and experience that allow a company to deliver
a good or service.

“Using a new measure, we show that intangible capital is the
most important rm-determinant of corporate cash holdings. Our
measure accounts for almost as much of the secular increase in
cash since the 1980s as all other determinants together,”
Antonio Falato and Jae Sim of the Federal Reserve and Dalida
Kadyrzhanova of the University of Maryland write. (here
‘)

The rise of cash holdings by companies has been remarkable,
and a huge puzzle.

U.S. corporations now hold almost three times the amount of
cash they did in the 1970s. A variety of explanations has been
suggested; from the idea that companies are holding more cash
offshore to skirt taxes to accusations that executives won’t
make long-term investments because their own pay is tied so
closely to quarter-to-quarter profit measures. Those may be true
in part, but not the entire story.

Taper on tap, sweeteners at ready

Nov 21, 2013 21:34 UTC

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

By James Saft

(Reuters) – If you want to know what Janet Yellen will do as Fed chair, ignore her congressional testimony and watch Ben Bernanke’s lips.

Yellen, approved Thursday by the Senate Banking Committee, will get the job, but the real action is in speeches by Bernanke, who is less inhibited as he is on the way out, and in the Fed minutes, released Wednesday.

Here is how it is going to go: The Fed will taper, probably early next year, and will try to grease the skids by offering some kind of forward guidance to ease the pain. A bit of fiddling with the interest rate paid by the Fed to banks on reserves is possible too, but a lot less likely.

Taper on tap, sweeteners at ready: James Saft

Nov 21, 2013 21:32 UTC

Nov 21 (Reuters) – If you want to know what Janet Yellen
will do as Fed chair, ignore her congressional testimony and
watch Ben Bernanke’s lips.

Yellen, approved Thursday by the Senate Banking Committee,
will get the job, but the real action is in speeches by
Bernanke, who is less inhibited as he is on the way out, and in
the Fed minutes, released Wednesday.

Here is how it is going to go: The Fed will taper, probably
early next year, and will try to grease the skids by offering
some kind of forward guidance to ease the pain. A bit of
fiddling with the interest rate paid by the Fed to banks on
reserves is possible too, but a lot less likely.

The age of the 5 percent Ponzi scheme

Nov 20, 2013 21:45 UTC

Nov 20 (Reuters) – Things have come to a pretty pass when
Ponzi schemes are luring in the chumps with promises of only a 5
percent return.

A Federal judge on Monday ruled that Anthony J. Lupas, a
Pennsylvania Alzheimer’s sufferer and accused Ponzi king, does
not have the mental capacity to stand trial for 31 counts of
fraud and conspiracy. (here)

Prosecutors say the 78-year-old’s alleged scam fell apart in
2011 after he fell, injured his head and could not keep up with
the payouts. The reported details of the scheme, whereby Lupas
is alleged to have relieved investors of $6 million, are
unremarkable, save one: he was only promising a 5 percent annual
return.

Households borrow while business stints: James Saft

Nov 19, 2013 20:00 UTC

Nov 19 (Reuters) – Households are borrowing like it’s 2008
but businesses simply won’t play along.

That gap, between households which once again are taking on
debt and businesses which can find nothing better to do with
record profits than hand the money back to shareholders, is at
the center of our economic malaise.

Understand the working behind this and you may be able to
parse not just why everything from art to wine is fetching
record prices but why employment and conventional inflation
remain mired at unacceptable levels.

Column – Yellen delivers; tougher times ahead: James Saft

Nov 14, 2013 21:41 UTC

By James Saft

(Reuters) – On the standards by which these things are judged, Janet Yellen’s confirmation hearings went well, meaning markets rallied with little volatility.

Speaking before the U.S. Senate Banking Committee, the Federal Reserve Chair nominee was dovish, but not so much as to scare the horses.

“I consider it imperative that we do what we can to promote a very strong recovery,” Yellen, currently the Fed’s vice chair, told the panel.

Yellen delivers; tougher times ahead: James Saft

Nov 14, 2013 21:38 UTC

Nov 14 (Reuters) – On the standards by which these things
are judged, Janet Yellen’s confirmation hearings went well,
meaning markets rallied with little volatility.

Speaking before the U.S. Senate Banking Committee, the
Federal Reserve Chair nominee was dovish, but not so much as to
scare the horses.

“I consider it imperative that we do what we can to promote
a very strong recovery,” Yellen, currently the Fed’s vice chair,
told the panel.

Zen and the hell of low returns

Nov 13, 2013 21:14 UTC

Nov 13 (Reuters) – You can’t beat the market but the market
is probably going to slap you around a bit.

That’s the upshot from hedge fund guru Ray Dalio, who thinks
investing alpha, or outperformance, will be in short supply in
coming years. What’s worse, he sees equity returns, sapped by
years of QE, as only averaging about 4 percent a year for a
decade, with no diminution in volatility.

It’s enough to turn an investor to another of Dalio’s
interests: meditation.

ECB, Fed pile risk upon risk: James Saft

Nov 12, 2013 20:00 UTC

Nov 12 (Reuters) – With the European Central Bank and U.S.
Federal Reserve pulling the same way, global interest rates will
be lower for longer, feeding an ongoing rally in risky assets.

But since monetary policy has a bigger impact on financial
markets than the real economy – arguably, anyway – the bigger
the paper gains get, the more acute the risks become.

The ECB surprised virtually everyone last week when it cut
its key lending rate to 0.25 percent, reacting to an
uncomfortable slide in inflation and an equally vexing rise in
the value of the euro.

Column: ECB, Fed pile risk upon risk – James Saft

Nov 12, 2013 14:05 UTC

By James Saft

(Reuters) – With the European Central Bank and U.S. Federal Reserve pulling the same way, global interest rates will be lower for longer, feeding an ongoing rally in risky assets.

But since monetary policy has a bigger impact on financial markets than the real economy – arguably, anyway – the bigger the paper gains get, the more acute the risks become.

The ECB surprised virtually everyone last week when it cut its key lending rate to 0.25 percent, reacting to an uncomfortable slide in inflation and an equally vexing rise in the value of the euro.

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