Opinion

James Saft

Scotland and de-globalization: James Saft

Sep 9, 2014 04:01 UTC

Sept 9 (Reuters) – The prospect of Scottish independence is
further evidence that the era of increasing globalization, with
all its benefits to capital, is waning fast.

Support for independence, an issue to be put to a vote among
Scots on Sept. 18, has surged in recent days, with those in
favor registering their first opinion poll lead over the
weekend.

Not only would an independent Scotland have to come up with
some plan for a currency and monetary policy, an area in which
it has several options, each carrying its own dangers, but it
also would make more likely a British exit from the European
Union.

This is far from the only recent example of a retreat from
globalization, a word used to describe a process whereby the
movement of capital and goods, if not people, becomes more free
and trade tends to rise. Russia’s aggression in Ukraine neatly
dispels the canard that tight banking and trade links mean the
end of military hostilities. Similarly Iceland’s refusal to make
good the bubble era debts of its banks, and Argentina’s
willingness to default yet again show an increased willingness
on the part of some to take their chances and forgo some of the
benefits of the global system of capital raising.

Scotland’s case is distinct, being, broadly, that of an
electorate apparently being willing to exert more direct control
over their own conditions, over the objection of elites and
despite arguments that this higher level of control will bring
with it economic costs. That’s pretty much the opposite of
globalization, the gospel of which has preached that by
surrendering local control in order to allow easier movement of
goods and capital we can achieve better growth all round.

ECB policy is carry-trade-tastic: James Saft

Sep 4, 2014 21:08 UTC

Sept 4 (Reuters) – For all the uncertainty around the
European Central Bank’s extraordinary monetary policy, one thing
is for sure: it’ll be good for carry trades.

If an asset has a higher yield than euro-denominated ones,
and in today’s world many, many do, it will benefit from
increased flows from investors borrowing in euros and making
bets elsewhere. Notable beneficiaries will be emerging markets,
but the fun hardly stops there.

The ECB on Thursday made a slate of moves to react to
weakening growth in the euro zone. Three policy rates were cut
by 10 basis points, leaving the deposit facility at negative 20
basis points, in a move the ECB signaled was the end of the road
for conventional easing.

Column: Demographics and the bond market conundrum

Sep 3, 2014 21:00 UTC

By James Saft

(Reuters) – As we get older we become curiously susceptible to arguments that it is not us who have changed, but the world.

So it may be with the so-called bond market conundrum, in which the effect of our aging demographics gets very little attention despite likely having considerable impact.

As it was in 2005 when a puzzled Alan Greenspan made the idea of the conundrum popular, the issue today is a divergence between longer-dated Treasuries, which are falling in yield, and monetary policy, which is tightening. If the Federal Reserve had control over the bond market – itself a questionable idea – this should not be happening.

Demographics and the bond market conundrum

Sep 3, 2014 20:57 UTC

Sept 3 (Reuters) – As we get older we become curiously
susceptible to arguments that it is not us who have changed, but
the world.

So it may be with the so-called bond market conundrum, in
which the effect of our aging demographics gets very little
attention despite likely having considerable impact.

As it was in 2005 when a puzzled Alan Greenspan made the
idea of the conundrum popular, the issue today is a divergence
between longer-dated Treasuries, which are falling in yield, and
monetary policy, which is tightening. If the Federal Reserve had
control over the bond market – itself a questionable idea – this
should not be happening.

Russia tensions may help cut knot on euro zone policy: James Saft

Aug 28, 2014 21:12 UTC

Aug 28 (Reuters) – New tensions in Ukraine, which has
accused Russia of further incursions, may serve to light a fire
under efforts to bring looser monetary and fiscal policies to
the euro zone.

While Russia has denied the allegations, NATO on Thursday
said that well over 1,000 Russian troops were now inside Ukraine
in what would represent a large increase.

This makes more likely some interruption of Russian energy
shipments this winter and will exacerbate the economic effects
of sanctions both sides are imposing on one another.

Serving clients, not beating markets

Aug 27, 2014 20:17 UTC

Aug 27 (Reuters) – It may be that the future of wealth
management lies not in beating the market but in helping the
client beat her true opponent: herself.

The traditional offering of the investment management
industry – putting people into products which outperform – is
under siege, hit by a trend of dwindling relative performance
and massive defections of money to passive index-based
strategies and products.

Charles Ellis, an eminence grise of index investing and the
founder of Greenwich Associates, argues that the combination of
falling fees for active management and the continued flow of
funds into index products is going to challenge the economics
and structure of the investment industry as we know it.

Draghi calls for fiscal help, hears busy signal: James Saft

Aug 26, 2014 04:01 UTC

Aug 26 (Reuters) – It may well be a big deal that Mario
Draghi is now talking fiscal stimulus, but the unlikeliness of
this happening only underscores that he’ll be forced to do more
with monetary policy.

The European Central Bank president delivered a
ground-breaking speech at Jackson Hole, calling for government
spending to do more of the heavy lifting of bringing idled
workers back on the job while acknowledging that, his previous
excuses aside, market prices show he is losing the battle
against falling inflation.

All of this is refreshing, and would be highly encouraging
but for some pesky realities.

Yellen as many-handed policy goddess: James Saft

Aug 22, 2014 18:56 UTC

Aug 22 (Reuters) – Harry Truman once made a plea for a
one-armed economist, being sick and tired of his advisors always
saying “on the one hand this, but on the other hand something
else”.

Federal Reserve Chair Janet Yellen in her speech at Jackson
Hole on Friday was like something out of old Harry’s nightmares,
offering up so many alternative explanations for the state of
the economy that she seemed like a many-handed Indian goddess of
economists.

One way to look at it would be to see the speech as a
justifiable acknowledgement that the world, and specifically
today’s economy, is far too complex and opaque to be boiled down
to simple alternatives of ‘hawkish’ or ‘dovish’.

Buffett hoards cash, individuals’ holdings hit 14-year low

Aug 20, 2014 20:44 UTC

Aug 20 (Reuters) – Individual investors have been cutting
back on cash in portfolios, the exact reverse of what Warren
Buffett has been doing at Berkshire Hathaway.

Who do you think has got it right?

Cash at Berkshire Hathaway stood at just over $55
billion as of June 30, an all-time high and two and a half times
the level he’s in the past said he likes to keep on tap to meet
extraordinary claims at his insurance businesses. That’s also up
more than 50 percent from a year ago.

Buffett’s green pile is in sharp contrast to individual
investors, who’ve cut cash in portfolios to 15.8 percent, a
14-year low, according to the July asset allocation survey from
the American Association of Individual Investors.

The problem with Jackson Hole: James Saft

Aug 19, 2014 04:01 UTC

Aug 19 (Reuters) – There was a time, and I admit I miss it,
when the August Jackson Hole conference of central bankers got
about as much mainstream attention as a particularly
well-attended chess match.

Those were the good old days, before financialization,
economic crisis and political paralysis gave monetary policy an
arguably too central role in the economy and the allocation of
capital.

This week when central bankers from around the world meet at
the Kansas City Federal Reserve’s conclave at Jackson Hole,
Wyoming, investors and many other people who ought to have
better things to do will pay avid interest to the proceedings.

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