Opinion

James Saft

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.

I can think of no-one, with the possible exceptions of Robert Rubin and Alan Greenspan, who are more closely identified than Summers and Geithner with the errors of financial leadership of the past 15 years. And should either get the top job it would send a clear signal that efforts to properly regulate finance will come to very little, and that the chances of yet another in the long succession of crises are getting larger.

First Summers, who has a history of working to water down or make ineffective financial regulation dating back at least to his opposition to derivatives regulation and support for the dismantling of Glass-Steagall in the late 1990s.

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.

Bonds on sale but still too dear

Jun 12, 2013 20:55 UTC

June 12 (Reuters) – Sometimes, as with Treasury bonds right
now, a better deal just isn’t good enough.

A sharp selloff in Treasuries has taken yields higher,
theoretically offering better returns and better protection
against inflation. In fact, so-called real yields, meaning yield
adjusted for inflation, have actually gone into positive
territory. Benchmark 10-year Treasury Inflation Protected
Securities’ (TIPs) yields now stand at 0.13 percent, having
climbed into positive territory late last week after 18 months
in which investors paid for the privilege of getting some of
their money back later.

That’s better, but it is still not that good and does not
constitute much of a reason to load up on Treasuries.

Halfway to an emerging bear market: James Saft

Jun 11, 2013 04:05 UTC

By James Saft

(Reuters) – Already halfway to a bear market, emerging market stocks face slumping commodities prices and what looks very much like a global trade slowdown.

Benchmark shares in emerging markets are slumping, with the MSCI Emerging Markets index down 10 percent from its January peak, halfway to the 20 percent fall that qualifies as a bear market.

While this is in contrast to strong gains in developed markets, which have been well supported by quantitative easing by major central banks, a quick look at data released by China over the weekend reveals the underlying reasons.

As U.S. retools, commods, emerging markets lose: James Saft

Jun 6, 2013 19:50 UTC

By James Saft

(Reuters) – The rebirth of U.S. manufacturing may be the key which unlocks the puzzle of the divergence of commodity prices from equity markets.

If so, commodity prices may be in for more pain, U.S. growth may be better than expected over the longer term and U.S.-based companies stand to reap the benefits.

One of the most interesting trends over the past two years is the way in which agricultural, metals and energy prices have trended downward even as equity prices rise. This is especially hard to reconcile given that economic growth, while only moderate, has been positive. The Thomson Reuters CRB index of commodities and energy has fallen about 10 percent since last September, during which time Germany’s DAX is up 14 percent, the S&P 500 a bit more and the Nikkei 225 a whopping 50 percent.

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