James Saft

Russia tensions may help cut knot on euro zone policy: James Saft

Aug 28, 2014 21:12 UTC

Aug 28 (Reuters) – New tensions in Ukraine, which has
accused Russia of further incursions, may serve to light a fire
under efforts to bring looser monetary and fiscal policies to
the euro zone.

While Russia has denied the allegations, NATO on Thursday
said that well over 1,000 Russian troops were now inside Ukraine
in what would represent a large increase.

This makes more likely some interruption of Russian energy
shipments this winter and will exacerbate the economic effects
of sanctions both sides are imposing on one another.

The net result is clearly not good for the euro zone
economy, which is already struggling with outbreaks of recession
in Italy, dangerously low inflation and high rates of

“In August, economic sentiment in the Eurozone already
dropped by the biggest margin since the heyday of the euro
crisis in mid-2012. A further escalation would pose a serious
risk of a renewed recession in the still-fragile economy,”
Christian Schulz, senior economist at Berenberg Bank, wrote in a
note to clients.

Serving clients, not beating markets

Aug 27, 2014 20:17 UTC

Aug 27 (Reuters) – It may be that the future of wealth
management lies not in beating the market but in helping the
client beat her true opponent: herself.

The traditional offering of the investment management
industry – putting people into products which outperform – is
under siege, hit by a trend of dwindling relative performance
and massive defections of money to passive index-based
strategies and products.

Charles Ellis, an eminence grise of index investing and the
founder of Greenwich Associates, argues that the combination of
falling fees for active management and the continued flow of
funds into index products is going to challenge the economics
and structure of the investment industry as we know it.

Draghi calls for fiscal help, hears busy signal: James Saft

Aug 26, 2014 04:01 UTC

Aug 26 (Reuters) – It may well be a big deal that Mario
Draghi is now talking fiscal stimulus, but the unlikeliness of
this happening only underscores that he’ll be forced to do more
with monetary policy.

The European Central Bank president delivered a
ground-breaking speech at Jackson Hole, calling for government
spending to do more of the heavy lifting of bringing idled
workers back on the job while acknowledging that, his previous
excuses aside, market prices show he is losing the battle
against falling inflation.

All of this is refreshing, and would be highly encouraging
but for some pesky realities.

Yellen as many-handed policy goddess: James Saft

Aug 22, 2014 18:56 UTC

Aug 22 (Reuters) – Harry Truman once made a plea for a
one-armed economist, being sick and tired of his advisors always
saying “on the one hand this, but on the other hand something

Federal Reserve Chair Janet Yellen in her speech at Jackson
Hole on Friday was like something out of old Harry’s nightmares,
offering up so many alternative explanations for the state of
the economy that she seemed like a many-handed Indian goddess of

One way to look at it would be to see the speech as a
justifiable acknowledgement that the world, and specifically
today’s economy, is far too complex and opaque to be boiled down
to simple alternatives of ‘hawkish’ or ‘dovish’.

Buffett hoards cash, individuals’ holdings hit 14-year low

Aug 20, 2014 20:44 UTC

Aug 20 (Reuters) – Individual investors have been cutting
back on cash in portfolios, the exact reverse of what Warren
Buffett has been doing at Berkshire Hathaway.

Who do you think has got it right?

Cash at Berkshire Hathaway stood at just over $55
billion as of June 30, an all-time high and two and a half times
the level he’s in the past said he likes to keep on tap to meet
extraordinary claims at his insurance businesses. That’s also up
more than 50 percent from a year ago.

Buffett’s green pile is in sharp contrast to individual
investors, who’ve cut cash in portfolios to 15.8 percent, a
14-year low, according to the July asset allocation survey from
the American Association of Individual Investors.

The problem with Jackson Hole: James Saft

Aug 19, 2014 04:01 UTC

Aug 19 (Reuters) – There was a time, and I admit I miss it,
when the August Jackson Hole conference of central bankers got
about as much mainstream attention as a particularly
well-attended chess match.

Those were the good old days, before financialization,
economic crisis and political paralysis gave monetary policy an
arguably too central role in the economy and the allocation of

This week when central bankers from around the world meet at
the Kansas City Federal Reserve’s conclave at Jackson Hole,
Wyoming, investors and many other people who ought to have
better things to do will pay avid interest to the proceedings.

Equities face hurdles after buyback boom fizzles: James Saft

Aug 14, 2014 20:58 UTC

By James Saft

(Reuters) – Share buybacks by U.S. corporations, a key source of support for equity prices in recent years, are slowing, raising questions over why and what it will mean.

Second-quarter buybacks were 20 percent below those in the first quarter among a universe of 700 companies followed by quant analysts at Societe Generale, and are now lower than they were in the second quarter of last year. In a broader universe followed by S&P Dow Jones Indices, buybacks fell 30 percent in the second quarter compared to the first.

Given that the S&P 500 index ended the quarter more than 20 percent up on a year before, it is clear we are now experiencing a diminishing effect from share buybacks, something which may well test comfortable assumptions about share valuations.

The better investors get, the less it avails them

Aug 13, 2014 21:04 UTC

Aug 13 (Reuters) – The good news is that active investment
managers are almost certainly better than ever.

The bad news is that it matters less and less.

Called “The Paradox of Skill” by Michael Mauboussin, head of
global financial strategies at Credit Suisse, this is the idea
that as the range of skills among players in a given game
narrows, the relative importance in luck in determining outcomes
rises. (here)

In other words, as the poorer players get squeezed out, as
they tend to over time, those with higher skills find fewer
mistakes to exploit.

ECB has an Italy problem, and vice versa: James Saft

Aug 12, 2014 04:09 UTC

By James Saft

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

Italy’s recession is a neat illustration not just of the unrelenting pressure on the European Central Bank to take radical steps to stave off deflation, but of why those steps may well work poorly.

Data last week showed the Italian economy contracting for the second straight quarter in April through June, entering its third recession since 2008, and a possible sign of the early and incomplete effects of sanctions against Russia.

ECB calls in the consultants. Hurrah?: James Saft

Aug 7, 2014 21:11 UTC

Aug 7 (Reuters) – Relax, people, the ECB is going to hire a

You might think that the threat of deflation, a recession in
Italy and some alarming signs of slowing growth in key member
states like Germany would call for action from the euro zone
central bank.

But this is Europe, and it’s August, so instead, apparently,
we are waiting for the finishing touches to be put on a contract
for someone to advise the ECB about reforming the asset-backed
securities market so it can stand to buy the bonds.

“The other news is that we are about to hire … a
consultant to help us design this program in the best possible
fashion,” ECB President Mario Draghi told the press conference
after the ECB left rates on hold and announced no new meaningful