Opinion

James Saft

A time of unqualified promises: James Saft

Apr 2, 2013 18:59 UTC

April 2 (Reuters) – Just as Mario Draghi’s pledge to “do
whatever it takes” to preserve the euro is being challenged, the
very same unqualified promise, this time to simply stop prices
falling, is about to be put into action in Japan.

In both cases within months we may well discover if it is
the promises or the problems which are without limits.

In Japan, newly appointed Bank of Japan Governor Haruhiko
Kuroda will on Wednesday convene a two-day policy meeting, his
first after assuming office and pledging to do – again those
words – “whatever it takes” to end years of deflation.

While Kuroda’s supporters would probably stress that
“whatever it takes” is in this instance a process rather than an
event, the BOJ is widely expected to take radical new steps in
its quest to achieve a 2 percent inflation target within two
years. Media have reported the central bank intends to move to
begin “open-ended” bond purchases directly rather than in 2014,
as well as to start buying longer-term bonds and possibly
expanding the range and scope of purchases of other assets such
as equities.

Open-ended, at least in this context, means that the central
bank will buy bonds until its goal is achieved, but the promise
is likely to be rather thin on the issue of exactly how it will
ratchet up its actions as the months pass and, as may well be,
prices stubbornly refuse to rise.

A time of unqualified promises

Apr 2, 2013 12:04 UTC

By James Saft

(Reuters) – Just as Mario Draghi’s pledge to “do whatever it takes” to preserve the euro is being challenged, the very same unqualified promise, this time to simply stop prices falling, is about to be put into action in Japan.

In both cases within months we may well discover if it is the promises or the problems which are without limits.

In Japan, newly appointed Bank of Japan Governor Haruhiko Kuroda will on Wednesday convene a two-day policy meeting, his first after assuming office and pledging to do – again those words – “whatever it takes” to end years of deflation.

“Cyprus euro” a boon to U.S. dollar: James Saft

Mar 27, 2013 19:08 UTC

By James Saft

(Reuters) – One clear winner from Cyprus’S imposition of capital controls is the U.S. dollar, which stands to benefit from public and private flows after another round of damage to the euro’s reserve currency status.

The euro fell to its lowest against the U.S. dollar in four months on Wednesday, falling below $1.28 after Cyprus moved to limit the flow of money out of the country in the aftermath of a bank bailout which singed foreign bank lenders and depositors alike. The dollar was just below its 52 week high against a trade-weighted basket of currencies, indicating that its strength was broad-based.

Following a bailout package that includes a substantial hit to uninsured deposits, many of them Russian, Cyprus imposed a limit of 300 euros per day on account withdrawals and set a limit of 5000 euros per month on credit and debit cards used abroad.

COLUMN: “Cyprus euro” a boon to US dollar: James Saft

Mar 27, 2013 19:04 UTC

March 27 (Reuters) – One clear winner from Cyprus’S
imposition of capital controls is the U.S. dollar, which stands
to benefit from public and private flows after another round of
damage to the euro’s reserve currency status.

The euro fell to its lowest against the U.S. dollar in four
months on Wednesday, falling below $1.28 after Cyprus moved to
limit the flow of money out of the country in the aftermath of a
bank bailout which singed foreign bank lenders and depositors
alike. The dollar was just below its 52 week high against a
trade-weighted basket of currencies, indicating that its
strength was broad-based.

Following a bailout package that includes a substantial hit
to uninsured deposits, many of them Russian, Cyprus imposed a
limit of 300 euros per day on account withdrawals and set a
limit of 5000 euros per month on credit and debit cards used
abroad.

Europe chokes moral hazard: James Saft

Mar 26, 2013 05:00 UTC

March 25 (Reuters) – Moral hazard may not be quite dead in
Europe but it has a bad, hacking cough.

A new, tougher policy on banking bailouts, made flesh in
Cyprus and enunciated by Dutch Finance Minister Jeroen
Dijsselbloem, will shrink Europe’s arguably overly-large banking
system and, ultimately, may put unbearable pressure on the
currency union.

Actually the policy, allowing holders of bonds and uninsured
depositors in insolvent banks to actually lose money, is not so
much new as a return to following the rules of capital
structure, with equities taking the first loss and uninsured
deposits the last to suffer.

Learning from Cyprus

Mar 22, 2013 17:20 UTC

By James Saft

(Reuters) – Even if you have zero exposure to the euro, the sad tale of Cyprus teaches investors about important old and new realities.

This tutorial comes compliments of the tiny euro zone island off the coast of Greece, which has been a favored haven for billions of euros from mostly Russian investors but is now facing a financial meltdown.

First, there is still no free lunch. High-reward, low-risk investment products aren’t.

SAFT ON WEALTH: Learning from Cyprus

Mar 21, 2013 19:20 UTC

March 21 (Reuters) – Even if you have zero exposure to the
euro, the sad tale of Cyprus teaches investors about important
old and new realities.

This tutorial comes compliments of the tiny euro zone island
off the coast of Greece, which has been a favored haven for
billions of euros from mostly Russian investors but is now
facing a financial meltdown.

First, there is still no free lunch. High-reward, low-risk
investment products aren’t.

UK unleashes the dogs of subprime: James Saft

Mar 20, 2013 19:26 UTC

March 20 (Reuters) – Cry ‘Bubble!’ and let slip the dogs of
subprime.

Britain on Wednesday unveiled a new budget including 130
billion pounds of mortgage guarantees which will enable patsies,
er, hardworking home-buyers, to buy properties worth as much as
600,000 pounds ($900,000) with as little as 5 percent down.

And no, thank you for asking, Chancellor of the Exchequer
George Osborne did not just wake up after six years in a
medically induced coma.

Cyprus gets on with it: James Saft

Mar 19, 2013 04:00 UTC

March 19 (Reuters) – Unfair and a bungle it may be, but the
plan to levy bank deposits in Cyprus does have its virtues.

This is especially true if the proposed 5.8-billion-euro
levy is re-worked to shelter smaller depositors, allowing more
of the burden to fall on the huge number of large offshore
depositors, many of them from Russia.

The levy is a good thing for Cyprus in two ways: it helps to
protect future taxpayers; and it will tend to shrink the
island’s grossly distended financial services industry. It will
drive a stake through the heart of the idea that it is sensible
for an economy within the euro area to have a banking system
seven times the size of its GDP and will hopefully lead to the
withering away of its offshore banking industry.

SAFT ON WEALTH: The asset management shakeout

Mar 14, 2013 20:41 UTC

March 14 (Reuters) – The gusher of new money that has fed
the growth of the global asset management industry for a
generation has slowed to a trickle, making the next few years
make-or-break for many firms.

Growth in new money flows will slow to less than 1 percent
annually for each of the next five years, according to a study
by industry consultants Casey Quirk, as against 6 or 7 percent
in the good old days before the crisis.

That is sure to put pressure on many existing firms, many of
which owe their institutional framework to a time when a simple
focus on traditional products aimed at baby boomer savers was
enough to ensure success.

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