Opinion

James Saft

You must be joking, Mr. Bernanke: James Saft

Jan 16, 2014 21:59 UTC

Jan 16 (Reuters) – Well, now we know: monetary policy
certainly isn’t rocket science.

Asked on Thursday if he was confident before implementing
quantitative easing that it would work, outgoing Federal Reserve
Chairman Ben Bernanke quipped:

“The problem with QE is that it works in practice, but it
doesn’t work in theory.”

Seriously, imagine a NASA official after a moon shot joking
that the booster rockets had worked in practice but not in
theory. Think of the looks he might get from the astronauts
standing alongside him.

Now, of course, Bernanke should be permitted one joke per
four-year term, and he did go on to say that the Fed’s use of QE
was grounded in practical experience from Japan and elsewhere as
well as theoretical underpinnings from academia.

Success has many fathers

Jan 15, 2014 21:10 UTC

Jan 15 (Reuters) – If you are like most investors, you
probably mistake catching a wave for being able to swim fast.

And considering that you also very likely can’t swim fast or
invest well, that is a dangerous combination.

It is easy to observe that people are more likely to give
themselves credit for good investment returns while blaming
their reverses on things outside their control, but now at last
we have data.

Fed taper may be vindicated, but watch from a distance: James Saft

Jan 14, 2014 05:01 UTC

Jan 14 (Reuters) – Sure, the Federal Reserve will probably
carry on tapering, and sure, they may ultimately be vindicated
by better economic data, but it is hard to see why you, as an
equity investor, should stick around to find out.

Friday’s U.S. jobs data, the worst by some measures in
years, was the equivalent for the Fed of one of those scenes in
a movie where the ground at the cliff face begins to give way
beneath the hero’s feet.

Having just last month inaugurated what they and investors
hope would be a stately and calm process of reeling back on the
amount of bond buying the Fed does every month, beginning with a
cut from $85 billion to $75 billion, the U.S. central bank was
unexpectedly confronted with some inconvenient facts. Not only
were the payroll figures the worst in nearly three years,
confounding market expectations, but the unemployment rate,
which is at the center of the Fed’s policy of trying to manage
longer-term expectations for when it will actually raise rates,
fell to 6.7 percent.

Deflation is deflation even if you deserve it

Jan 9, 2014 22:06 UTC

By James Saft

(Reuters) – Here is some unwelcome news for the likes of Greece, Ireland and Cyprus: Apparently it isn’t really deflation if you deserve it.

That’s the takeaway from remarks by ECB chief Mario Draghi, who despite persistently falling prices in some euro zone peripheral economies, was at pains on Thursday to define the problem away.

“We define deflation as a broad-based self-fulfilling, self-feeding fall in prices.” he told a press conference after the ECB left rates on hold. “We don’t see that in the euro area. We may see negative inflation rates in one or two countries, but we should also ask the question of ‘How much is due to the necessary rebalancing of an economy which lost competitiveness and had gone into financial and budgetary crisis and how much is due to actual true deflation?’”

Deflation is deflation even if you deserve it: James Saft

Jan 9, 2014 22:04 UTC

Jan 9 (Reuters) – Here is some unwelcome news for the likes
of Greece, Ireland and Cyprus: Apparently it isn’t really
deflation if you deserve it.

That’s the takeaway from remarks by ECB chief Mario Draghi,
who despite persistently falling prices in some euro zone
peripheral economies, was at pains on Thursday to define the
problem away.

“We define deflation as a broad-based self-fulfilling,
self-feeding fall in prices.” he told a press conference after
the ECB left rates on hold. “We don’t see that in the euro area.
We may see negative inflation rates in one or two countries, but
we should also ask the question of ‘How much is due to the
necessary rebalancing of an economy which lost competitiveness
and had gone into financial and budgetary crisis and how much is
due to actual true deflation?’”

Japan stocks may have strong 2014 follow-up

Jan 8, 2014 22:28 UTC

By James Saft

(Reuters) – You probably missed last year’s epoch-making rally in Japanese stocks, and if you are still underweight, you might just do it to yourself again.

After rising a massive 57 percent last year, its best year in four decades, Tokyo’s Nikkei 225 index will be supported in 2014 by support from local buyers, by the continued benefits of a cheap yen and, most of all, by massive quantitative easing.

None of this is to say that Abenomics, the program of reflation and reform pursued by Prime Minster Shinzo Abe and the Bank of Japan, will ultimately be successful. There is plenty to worry about there – from the fashion in which households appear to be carrying the worst of the burden to the deeply difficult medium-term demographic issues.

Column: Default, and other ugly words: James Saft

Jan 7, 2014 13:04 UTC

By James Saft

(Reuters) – Default, capital controls and high inflation are all such ugly words but they may, for many of the world’s largest economies, prove to be necessary tactics.

Thus far the official response to the crisis has concentrated on rather less painful measures: a bit of austerity, a willingness to create conditions which are helpful to debtors (AKA kicking the can down the road), and the hope of growth.

But the sheer size of the debt burden in large economies, not to mention the historical record, argue that ultimately we may need to turn instead to more painful measures, ones which unfortunately make it much easier to see who is benefiting at whose expense.

Default, and other ugly words: James Saft

Jan 7, 2014 05:01 UTC

Jan 7 (Reuters) – Default, capital controls and high
inflation are all such ugly words but they may, for many of the
world’s largest economies, prove to be necessary tactics.

Thus far the official response to the crisis has
concentrated on rather less painful measures: a bit of
austerity, a willingness to create conditions which are helpful
to debtors (AKA kicking the can down the road), and the hope of
growth.

But the sheer size of the debt burden in large economies,
not to mention the historical record, argue that ultimately we
may need to turn instead to more painful measures, ones which
unfortunately make it much easier to see who is benefiting at
whose expense.

After go-go decade, farmland faces threats

Dec 26, 2013 20:32 UTC

Dec 26 (Reuters) – The rise and rise of farmland values
faces two tough challenges: falling crop prices and rising
interest rates.

Because farmland is not a widely-held investment, with the
exception of large institutions, its remarkable rise gets
comparatively little attention.

Illinois average farmland prices more than doubled, to
$7,900 per acre in the six years to 2013, according to one
Department of Agriculture measure.

The trouble with forward guidance: James Saft

Dec 24, 2013 05:02 UTC

By James and Saft

(Reuters) – Keeping your word is hard, and people simply hate it when you don’t, something that central bankers enamored of the vogue for “forward guidance” may soon learn.

The Federal Reserve put forward guidance – essentially a pledge or promise to keep policy within certain parameters for a set period of time or given certain conditions being met – at the center of its strategy for keeping control over market interest rates while withdrawing from bond buying. In announcing a $10 billion per month taper, or reduction in bond buying last week, the Fed sweetened the medicine by hardening forward guidance to indicate that rates could remain near zero “well beyond” the time unemployment drops below 6.5 percent so long as inflation remains below a 2 percent target.

In some ways this has worked admirably – markets for risky investments remain upbeat. But in other areas, namely the exchanges where people make bets about future interest rate moves, things seem to be getting away from the Fed.

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