Opinion

James Saft

Un-funny jokes about credit: James Saft

Dec 10, 2013 05:01 UTC

Dec 10 (Reuters) – What happens when credit conditions are
far too loose, the banking system is fragile and interest rates
start to rise?

Yes, I know you have heard this joke before, and yes, I know
it is not funny.

The Bank for International Settlement’s quarterly review of
financial conditions is an exercise in nightmarish deja vu:
familiar to those who watched the last crisis but just different
enough to be plausible. ()

Not only are credit markets so loose that comparison with
pre-Lehman Brothers days are fair, but this is happening within
a context in which investors, on the whole, don’t really have
faith in the strength of banks.

This implies that if interest rates start to rise, and
recent data and rumblings from central banks indicate they may,
a reckoning of some kind will be at hand.

So how loose is credit?

“What is happening in corporate markets is unusual. It is as
if the typical relationship with the macroeconomy has taken a
holiday,” Claudio Borio of the BIS said at a press conference.

Much at stake for EM on jobs Friday: James Saft

Dec 5, 2013 20:58 UTC

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

By James Saft

(Reuters) – Emerging markets will have a great deal at stake when Friday’s U.S. jobs figures are announced.

If the data is good and a Federal Reserve taper seems more likely, emerging markets will fall, hard, while if hiring was disappointing we can count on an outsized rally.

In part, this is for no more complicated a reason than emerging markets are at the riskier end of the investment spectrum. Bond buying works by exchanging cash for ‘safe’ assets and forcing a new investment decision with lower returns for safety. That is intended to prompt risk-taking and the riskier an investment the more, proportionally, it benefits.

Individual bonds are an investment, not an Ark

Dec 4, 2013 20:49 UTC

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

By James Saft

(Reuters) – Some day, perhaps soon, interest rates are going to start to go up decisively.

And on that day, when it comes, some investment advisors are going to stroke their chins and spout nonsense to the effect that you are better off in individual bonds rather than bond funds.

This fallacy, maybe one of the oldest and hardest investment misconceptions to stamp out, hinges on the idea that owners of bonds are not forced to take losses because they can hold their securities to maturity.

Amazon, drones and low returns: James Saft

Dec 3, 2013 05:01 UTC

Dec 3 (Reuters) – Jeff Bezos’ plan to deliver Amazon.com
packages by drone isn’t just an idea which skirts the line
between satire and reality.

It is also a neat little illustration of how technological
innovation may be lowering overall investment returns.

The online retailer is testing delivery by unmanned flying
vehicle, Bezos, Amazon.com founder and CEO, told CBS TV
show 60 Minutes on Sunday. Drones, heretofore best known for
their military uses, could be useful for packages up to 5 lbs in
weight, a segment which comprises 86 percent of Amazon.com
deliveries, he said. ()

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.

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.

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