Opinion

James Saft

Investing for peak population

Sep 11, 2013 20:50 UTC

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

By James Saft

(Reuters) – Peak population is coming, sooner than you think, and bringing with it enormous investment challenges.

Birthrates are falling, and will continue to do so, especially in fast-urbanizing emerging markets, according to Sanjeev Sanyal, an economist and demographer who is also global strategist at Deutsche Bank.

“We feel that the world’s overall fertility rate will fall to replacement rate by 2025. Population will continue to rise for a couple of decades, in large part because of increasing lifespan, but this is a major global turning point, and one with profound investment implications,” Sanyal wrote in a note to clients released on Monday.

That would be about 50 years sooner than recent UN estimates, which expect peak population in about 2100.

While a falling and aging population would obviously present opportunities, and from many perspectives is a good thing, it is hard to overstate the challenges for investors in a world in which the number of people is actually shrinking. A 2010 Bank for International Settlements paper by economist Elod Takats estimated that demographics would, over 40 years, shave about 1 percent a year off of asset prices. That’s a huge bite out of returns.

Fed finally making policy for humans, not Vulcans: James Saft

Sep 10, 2013 04:13 UTC

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

By James Saft

(Reuters) – Someone at the Federal Reserve finally figured out that we are not Vulcans but humans.

Rather than pointy-eared aliens constantly performing discounted cash flow calculations, we are actually, as investors, often chumps, prone to irrational enthusiasms leading to bubbles, San Francisco Fed President John Williams acknowledged in a speech on Monday. (here)

The implication is that many of us are about to feel that very human emotion of chagrin as we watch the value of our houses and stocks go down.

India, Rajan and the Great Man fallacy: James Saft

Sep 5, 2013 20:09 UTC

By James Saft

(Reuters) – Enthusiasm for new Indian central bank head Raghuram Rajan is understandable, but blind faith in him is misplaced.

While Rajan, the former IMF chief economist who took over as Governor of the Reserve Bank of India on Wednesday, made promising first steps, he simply doesn’t have the tools or levers to do what is needed.

Almost more to the point, the euphoria around Rajan is evidence of the Great Man fallacy of central banking, an always foolish belief that complex events can be bent to the will of one magical civil servant.

The unwelcome return of risk-on, risk-off

Sep 4, 2013 20:01 UTC

By James Saft

(Reuters) – After ebbing for most of the year, correlations are creeping back into financial markets.

Many investors, especially stock pickers, hoped they’d seen the last of “risk-on, risk-off”, a pattern in which commodities, stocks, currencies and bonds move very tightly in predictable ways and which has been the dominant trade in the post-financial-crisis landscape.

That certainly was the way the world looked even a month ago, with more assets going up or down on their own merits and prospects rather than in a lemming-like flight from risk towards safety or vice versa.

Most news bad for emerging markets: James Saft

Aug 29, 2013 20:54 UTC

By James Saft

(Reuters) – Syria today, the taper tomorrow – emerging market policymakers are learning that once the market becomes concerned with a current account deficit, most news is bad news.

Having enjoyed easy funding and massive inflows for much of the post-financial crisis period, the prospect of structurally higher global interest rates has made the world suddenly a much less welcoming place for emerging markets.

Expectations that a U.S-led military strike against Syria would cause oil to spike in cost, driving up current account deficits for non-oil-producing countries, helped spur the latest weakness. And any bit of good U.S. economic news, bringing with it higher chances of a Federal Reserve cutback on bond purchases, have only made it worse.

Don’t ‘war game’ your portfolio

Aug 28, 2013 20:51 UTC

By James Saft

(Reuters) – Investors fearing the impact of an attack on Syria ought to start worrying instead about things they can predict and control.

In other words – and with apologies to Nathan Rothschild, whose advocacy of buying during times of war is probably apocryphal anyway – don’t “buy when there is blood in the streets,” hold.

Global markets have been roiled in recent days by a rising conviction that the United States will lead military strikes against the Syrian government in reprisal for its alleged use of chemical weapons on its own people. Emerging market assets were hit hard again on Wednesday, while Brent crude oil hit a six-month high of $117 a barrel. Gold also rose, and U.S. stocks, which had fallen on the theme on Monday, recovered a bit of ground.

Taper talk meets data reality: James Saft

Aug 27, 2013 05:04 UTC

By James Saft

(Reuters) – Looked at in isolation, the economic data in the United States does not argue for the Federal Reserve to cut back on its bond purchases starting in September.

Yet markets and economists continue, in the main, to expect the so-called taper, a process where the Fed begins to reduce the $85 billion per month it buys in bonds, to be announced at its September meeting.

On the face of it, that expectation should have been dealt two massive blows by data about new home sales and the purchase of big-ticket durable goods released on Friday and Monday.

The Jackson Hole policy void: James Saft

Aug 22, 2013 22:22 UTC

Aug 22 (Reuters) – The risk in all transitions is a
destabilizing void, and at this year’s Jackson Hole Federal
Reserve conference a policy void is leading the agenda.

Despite this being the eve of what may be the most important
rollback of monetary policy ever, Ben Bernanke has passed on the
chance to make a valedictory address. This marks first time a
sitting Federal Reserve chairman has missed the event since
1987, when Alan Greenspan stayed home just days after being
confirmed by Congress for the job.

The event, organized annually by the Kansas City Fed at the
mountain resort in Wyoming, has long been not just a place to
exchange ideas but the backdrop for preparing the markets and
investors for important changes in policy.

HOLD DR The Jackson Hole policy void: James Saft

Aug 22, 2013 21:18 UTC

Aug 22 (Reuters) – The risk in all transitions is a
destabilizing void, and at this year’s Jackson Hole Federal
Reserve conference a policy void is leading the agenda.

Despite this being the eve of what may be the most important
rollback of monetary policy ever, Ben Bernanke has passed on the
chance to make a valedictory address. This marks first time a
sitting Federal Reserve chairman has missed the event since
1987, when Alan Greenspan stayed home just days after being
confirmed by Congress for the job.

The event, organized annually by the Kansas City Fed at the
mountain resort in Wyoming, has long been not just a place to
exchange ideas but the backdrop for preparing the markets and
investors for important changes in policy.

Saft on Wealth: Warren Buffett’s bubble cash-out strategy

Aug 21, 2013 20:28 UTC

By James Saft

(Reuters) – Here is Warren Buffett’s pension fund management advice in a nutshell: Be patient, buy only a few things, ignore the stock market until it becomes irrationally optimistic, at which point sell.

A recently released 1975 letter from Buffett to Washington Post owner Katharine Graham on the subject offers new insight into how early Buffett was to grasp both the difficulties of pension fund management and the inability of Wall Street to provide adequate solutions.

Perhaps even more valuable is the way the letter throws light on Buffett’s approach to value investing. Buffett tries to act not like a typical fund manager but like a company owner thinking about buying another company. The crucial ingredients: patience, to get a good purchase price; courage, to stick with your investment if the business is doing well but the market doesn’t agree; and a willingness to sell into a bubble when, as so often happens, one comes along.

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