Opinion

James Saft

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.

Dalio, the founder of $120 billion hedge fund firm
Bridgewater Associates, thinks the Fed is getting diminishing
returns from its bond buying.

“It is working with a consistently decreasing effect and
will work with even less effect,” he told a conference sponsored
by The New York Times. (here)

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.

Column: Twitter and the coming crisis: James Saft

Nov 8, 2013 07:01 UTC

By James Saft

(Reuters) – The bad news is: we are going to have another crisis.

The good news is that by then promoted messages on Twitter will make it easy to find bankruptcy attorneys.

Yes, this was the week that Twitter (TWTR.N: Quote, Profile, Research) went public at a stratospheric valuation and the Federal Reserve, in two papers, set the stage for yet more aggressive monetary policy.

Those events are linked, of course, and though it may take a while, both will bear some bitter fruit.

Twitter and the coming crisis: James Saft

Nov 7, 2013 21:40 UTC

By James Saft

(Reuters) – The bad news is: we are going to have another crisis.

The good news is that by then promoted messages on Twitter will make it easy to find bankruptcy attorneys.

Yes, this was the week that Twitter went public at a stratospheric valuation and the Federal Reserve, in two papers, set the stage for yet more aggressive monetary policy.

Those events are linked, of course, and though it may take a while, both will bear some bitter fruit.

Toyota bounty shows Abenomics snags

Nov 6, 2013 21:44 UTC

Nov 6 (Reuters) – Toyota’s sparkling earnings show how
Abenomics may be good for Japanese companies now, but perhaps a
bust for investing in Japan over the long term.

Toyota, the world’s biggest car maker, reported a
70 percent jump in profits last quarter, as it got a boost from
this year’s 12 percent drop in the yen against the dollar
.

A look under the hood, however, shows that Toyota’s gains
may not translate into the sustained expansion Japan hopes
Abenomics will spark. Named after Prime Minister Shinzo Abe,
Abenomics is an attempt to use government spending, radical
monetary policy and competitive reform to finally rescue Japan
from a 20-year-plus slump.

The QE deflation puzzle: James Saft

Nov 5, 2013 20:00 UTC

Nov 5 (Reuters) – When it comes to creating inflation, bond
buying by central banks may actually ultimately be
counterproductive.

Called quantitative easing, it continues to be a mainstay of
the policy reaction to the ongoing economic malaise. Yet here we
are five years later and the evidence that QE can kindle
inflation, much less revive the economy, is decidedly mixed.

In part that may be because everyone realizes that QE isn’t
forever: ultimately the bonds the bank buys will have to be
repaid. It is also true – and here we can consider the
remarkable valuations of Twitter and Pinterest – that QE causes
bad investments, which ultimately must be deflationary.

Column: Europe faces deflation threat – James Saft

Oct 31, 2013 19:20 UTC

By James Saft

(Reuters) – Europe faces a threat of deflation, which it seems unlikely to be willing to fight.

Core inflation in the euro zone fell sharply in October to just 0.8 percent a year, the lowest since early 2010 and a level which sets the red deflation light flashing.

Deflation, or even low inflation, is particularly bad news for Europe, whose particular burden is too much debt. Inflation eats away at the real value of debt, thus making it easier to bear. Deflation does the opposite.

Europe faces deflation threat: James Saft

Oct 31, 2013 19:18 UTC

Oct 31 (Reuters) – Europe faces a threat of deflation, which
it seems unlikely to be willing to fight.

Core inflation in the euro zone fell sharply in October to
just 0.8 percent a year, the lowest since early 2010 and a level
which sets the red deflation light flashing.

Deflation, or even low inflation, is particularly bad news
for Europe, whose particular burden is too much debt. Inflation
eats away at the real value of debt, thus making it easier to
bear. Deflation does the opposite.

Early holiday courtesy of Fed

Oct 30, 2013 21:46 UTC

Oct 30 (Reuters) – Gorge on Halloween candy, Thanksgiving
turkey and risk: the Fed has declared an early and extended
holiday.

The Federal Reserve left policy unchanged at its meeting on
Wednesday, maintaining its $85 billion per month schedule of
bond buying and making only a few changes to the accompanying
statement.

The Fed said it wanted to see more data before making any
changes to policy, while noting that the recovery in housing has
slowed and inflation remains below target.

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