Opinion

James Saft

SAFT ON WEALTH: The case against commodities grows

Jul 24, 2013 20:20 UTC

July 24 (Reuters) – Buying commodities in order to diversify
your portfolio might not be that bright an idea after all.

A new study from the Bank for International Settlements
disputes the idea that adding commodities to a portfolio can
lower the volatility of returns. Considering that this has been
the bedrock idea underlying the buying and selling of
commodities as an asset class over the past 15 years or so, this
is big news. ( www.bis.org/publ/work420.pdf )

Taken in combination with trends negative for commodities
markets like the migration of manufacturing back to developed
markets and 3-D printing, there may be fewer reasons for
investors to consider the asset class.

The study, by Marco Lombardi of the BIS and Francesco
Ravazzolo of Norges Bank, looked at correlations between returns
in commodities and equities markets and found that, having been
about zero for a decade, they have increased markedly from 2008
to now.

Rather than moving in different directions, commodities
markets have been moving along with equities, creating more
volatility for portfolios.

Column: Detroit and the importance of failure – James Saft

Jul 23, 2013 04:15 UTC

By James Saft

(Reuters) – Here is the real meaning of Detroit: human institutions sometimes fail and we are far better off acknowledging and accommodating this than fighting it.

Information from failure is a large part of the value created by markets and by experimentation, and we ignore and suppress that information, as we are now in the banking system and elsewhere, only at great cost.

Detroit filed for what would be the largest municipal bankruptcy in U.S. history on Friday, a move which will be bitterly fought in the courts by its creditors and by municipal workers who stand to lose promised retirement and health benefits.

Detroit and the importance of failure: James Saft

Jul 23, 2013 04:00 UTC

July 23 (Reuters) – Here is the real meaning of Detroit:
human institutions sometimes fail and we are far better off
acknowledging and accommodating this than fighting it.

Information from failure is a large part of the value
created by markets and by experimentation, and we ignore and
suppress that information, as we are now in the banking system
and elsewhere, only at great cost.

Detroit filed for what would be the largest municipal
bankruptcy in U.S. history on Friday, a move which will be
bitterly fought in the courts by its creditors and by municipal
workers who stand to lose promised retirement and health
benefits.

The Summers or Geithner nightmare: James Saft

Jul 18, 2013 20:55 UTC

By James Saft

(Reuters) – If you got me at gun-point, backed me up to the edge of a high cliff and forced me to choose between Larry Summers and Tim Geithner as the next Federal Reserve Chairman, I think I might jump.

And yet, the two former Treasury secretaries are the third and fourth favorites in the running for the job, according to Irish bookmakers Paddypower. (here)

Summers, at odds of 5.5 to 1, and Geithner, at 14 to 1, are still relative outsiders, with Federal Reserve Vice Chairman Janet Yellen the 1 to 4 favorite to take over if, as expected, Ben Bernanke steps down at the expiration of his term in January.

Bernanke drops a D-bomb

Jul 17, 2013 20:17 UTC

By James Saft

(Reuters) – Ben Bernanke dropped a D-bomb on Congress on Wednesday.

And no, though much of his testimony arguably depicted lawmakers as dumb, ‘D’ in this context stands for deflation.

“The (Federal Open Market) Committee is certainly aware that very low inflation poses risks to economic performance – for example, by raising the real cost of capital investment – and increases the risk of outright deflation,” Bernanke told the House of Representatives Financial Services Committee.

“Consequently, we will monitor this situation closely as well, and we will act as needed to ensure that inflation moves back toward our 2 percent objective over time.”

Watch profits and yields, not jobs: James Saft

Jul 16, 2013 18:59 UTC

July 16 (Reuters) – The Federal Reserve is watching job
creation, but investors will be better off keeping a wary eye on
profits and bond yields.

Yields have risen in the past two months, while corporate
profits may be on the slide, both of which should undercut job
growth and exercise a powerful influence over the Fed’s next
move.

While the evidence from the first week of corporate profit
reporting season is mixed, profits and margins look to have
weakened in the second quarter as companies struggle with lower
spending by governments and a difficult environment of falling
inflation.

Column: Watch profits and yields, not jobs – James Saft

Jul 16, 2013 12:16 UTC

By James Saft

(Reuters) – The Federal Reserve is watching job creation, but investors will be better off keeping a wary eye on profits and bond yields.

Yields have risen in the past two months, while corporate profits may be on the slide, both of which should undercut job growth and exercise a powerful influence over the Fed’s next move.

While the evidence from the first week of corporate profit reporting season is mixed, profits and margins look to have weakened in the second quarter as companies struggle with lower spending by governments and a difficult environment of falling inflation.

Ignore the bad news on emerging markets

Jul 10, 2013 18:24 UTC

By James Saft

(Reuters) – Truth is, emerging markets haven’t just been bad but are likely to get worse, especially in comparison to developed markets.

The bigger truth, however, is that most investors should simply ignore this and stick with their strategic allocations in order to get the benefit of diversification.

First I will make the medium-to-long-term bear case against emerging markets. Then I’ll explain why you probably shouldn’t really care.

Reckless bankers, or just stupid and idle?: James Saft

Jul 9, 2013 04:03 UTC

By James Saft

(Reuters) – As Supreme Court Justice Potter Stewart once said of pornography, we may not be able to fully define the proposed new British offense of “reckless banking” but I suppose we will know it when we see it.

Or perhaps, as has been the case about obscenity since 1964 when Stewart dissented in an opinion about the prosecution of a French film, we will just become more used to it.

The British Treasury on Monday said it planned to introduce legislation making possible criminal prosecution of senior bankers for reckless misconduct, a step suggested last month by a parliamentary commission on banking standards.

Column: Market turmoil could re-ignite euro zone risk – James Saft

Jun 13, 2013 19:58 UTC

By James Saft

(Reuters) – Right about now might be a good time to start worrying again about European peripheral debt.

Along with just about every other risk asset the debt of the weaker members of the euro has sold off in recent weeks, hit by rising yields in higher-rated government bonds and a general pullback from bonds.

If markets regain their equilibrium that’s all it may turn out to be – a short selloff in sympathy with global markets.

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