Opinion

James Saft

The next crisis: Fed promised, Fed delivered – James Saft

Apr 23, 2013 12:01 UTC

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

By James Saft

(Reuters) – Don’t say you weren’t warned.

The next crisis is coming, driven on by Federal Reserve policy which in seeking to keep inflation and employment on target will also breed financial instability.

Don’t take my word for it – this is all straight from Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, who last week laid out his thinking on why low rates will be needed for years to come and what the side-effects will be.

“I’ve suggested that it is likely that, for a number of years to come, the Federal Open Market Committee will only achieve its dual mandate of maximum employment and price stability if it keeps real interest rates unusually low,” Kocherlakota said in a speech in New York.

“I’ve also argued that when real interest rates are low, we are likely to see financial market outcomes that signify instability. It follows that, for a considerable period of time, the FOMC may only be able to achieve its macroeconomic objectives in association with signs of instability in financial markets.”

In Kocherlakota’s view, raising rates would definitely drive both prices and employment further down – and away from the Fed’s mandate. Higher rates would also reduce the risk of a financial crisis, he said, one which could hurt employment and price stability even more. (here)

Oh no, they are saying it’s different this time

Apr 18, 2013 20:42 UTC

By James Saft

(Reuters) – You never like to see the words “inflation,” “central banks” and “it’s different this time” in close proximity to each other.

That, however, is the essential message in the International Monetary Fund’s World Economic Outlook, which argues that the relationship between unemployment and inflation may have fundamentally changed.

What’s more, the IMF is giving credit to central banks, which it says have inspired new confidence in their ability to control inflation.

Meditation and the art of investment

Apr 17, 2013 20:29 UTC

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

By James Saft

(Reuters) – From Ray Dalio to Bill Gross, some of the biggest names in money management are practicing meditation.

At a conference last week in Washington, Dalio expounded on how his practice of meditation has helped his investment performance. Georgetown University, at the same conference, announced it would begin to offer a semester-long class on the discipline at its graduate business school. (link.reuters.com/kav47t)

While money managers often joke that clients are the biggest impediment to beating the market because they make emotional mistakes, the truth is that all investors, big and small, share traits which get in the way of making the best choices.

SAFT ON WEALTH: Meditation and the art of investment

Apr 17, 2013 20:28 UTC

April 17 (Reuters) – From Ray Dalio to Bill Gross, some of
the biggest names in money management are practicing meditation.

At a conference last week in Washington, Dalio expounded on
how his practice of meditation has helped his investment
performance. Georgetown University, at the same
conference, announced it would begin to offer a semester-long
class on the discipline at its graduate business school. ()

While money managers often joke that clients are the biggest
impediment to beating the market because they make emotional
mistakes, the truth is that all investors, big and small, share
traits which get in the way of making the best choices.

Gold’s fall not a harbinger of happy days: James Saft

Apr 16, 2013 12:07 UTC

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

By James Saft

(Reuters) – Just as gold’s rise never showed the policies of central banks to be a failure, so its fall cannot show they have succeeded.

Yes, the attraction to gold is driven by mistrust, its principal virtue being that, unlike currencies, it can’t be created at will. No, the massive sell-off over two days in gold is not a sign that trust is back and policy-makers can soon declare victory over the crisis and make plans for restoring a more normal balance of policy.

Monday marked the second day of gold’s worst two-day tumble since 1983, as it fell more than 9 percent amid huge volumes, taking its total losses since Friday to 14 percent.

Insider trading – all the cool kids are doing it

Apr 11, 2013 21:07 UTC

By James Saft

(Reuters) – There are a bunch of kids out there trading on inside information, and you, me and the rest of the economy are paying the price.

A study of trading patterns in Finland shows a highly suspicious pattern of activity in accounts held on behalf of juveniles.

In reality, it is probably not the kids themselves who are playing at being junior insider traders, but instead it is their guardians who are likely using juvenile accounts as a safer way to profit from non-public knowledge.

SAFT ON WEALTH: Insider trading – all the cool kids are doing it

Apr 11, 2013 21:03 UTC

April 11 (Reuters) – There are a bunch of kids out there
trading on inside information, and you, me and the rest of the
economy are paying the price.

A study of trading patterns in Finland shows a highly
suspicious pattern of activity in accounts held on behalf of
juveniles.

In reality, it is probably not the kids themselves who are
playing at being junior insider traders, but instead it is their
guardians who are likely using juvenile accounts as a safer way
to profit from non-public knowledge.

Equities in a sweet rut

Apr 10, 2013 19:55 UTC

By James Saft

(Reuters) – The record-breaking rise of the stock market is in part a function of the lousy jobs picture, which ensures an ongoing prescription refill of Federal Reserve medicine.

The S&P 500 index hit a record high on Wednesday, rising more than 1 percent to as much as 1588. Since data showed on Friday that the economy added just 88,000 jobs in March, the S&P has added a cool 2.3 percent. And while the jobless rate fell to 7.6 percent this was largely thanks to almost 500,000 people falling out of the workforce, taking the labor force participation rate to its lowest since 1978.

This state of play isn’t indefinitely sustainable, but there is absolutely no contradiction between a spluttering economy and a levitating stock market.

Equities in a sweet rut: James Saft

Apr 10, 2013 19:49 UTC

April 10 (Reuters) – The record-breaking rise of the stock
market is in part a function of the lousy jobs picture, which
ensures an ongoing prescription refill of Federal Reserve
medicine.

The S&P 500 index hit a record high on Wednesday, rising
more than 1 percent to as much as 1588. Since data showed on
Friday that the economy added just 88,000 jobs in March, the S&P
has added a cool 2.3 percent. And while the jobless rate fell
to 7.6 percent this was largely thanks to almost 500,000 people
falling out of the workforce, taking the labor force
participation rate to its lowest since 1978.

This state of play isn’t indefinitely sustainable, but there
is absolutely no contradiction between a spluttering economy and
a levitating stock market.

Japan’s big leak: James Saft

Apr 9, 2013 12:13 UTC

By James Saft

(Reuters) – The Bank of Japan’s massive new bid for inflation will create growth but to its chagrin much of it may well be concentrated in financial markets and outside of Japan.

So long as Japanese consumers remained convinced that the new program will bring more inflation in what they buy rather than in what they earn, much of the benefit will be felt in Europe, the U.S. and the other economies into which the newly minted money will actually leak.

The BOJ last week vowed to spend $1.4 trillion in less than two years buying up bonds and assets in a bid to hit its avowed 2.0 percent inflation goal. The central bank will create money and wade into markets, vacuuming up Japanese government debt and other assets while targeting the amount of money in the economy rather than the rate of interest at which it will make loans.

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