Opinion

James Saft

Corporate bond risk gets silly once again: James Saft

Dec 19, 2012 21:35 UTC

Dec 19 (Reuters) – Proving yet again that history rhymes
rather than repeats, just a few short years after an epochal
crash the search for yield just gets wilder and wilder.

Perhaps the best place to see this is in the corporate bond
market, where yields are at or near all-time lows while, by some
measures in key sectors, investor protections have never been
weaker.

Don’t expect, though, to see a repeat of the bloodbath of
2008 and 2009, when markets froze and there was real fear that
normally viable companies would as a result hit the shoals. For
one thing, companies are more liquid and less leveraged.

Instead, the big risk for 2013 is that higher overall
interest rates make bonds issued in 2012′s rock-bottom rate
environment into big, but not catastrophic, losers.

Corporate borrowers have been a prime beneficiary of
monetary policy, as trillions of Federal Reserve bond buying
freed up money which then sought higher, if not safer, returns
elsewhere. That, indeed, was part of the plan, and investors
have streamed into riskier and higher yielding corporate bonds.

Abe’s threat to banks and the old: James Saft

Dec 18, 2012 05:03 UTC

By James Saft

(Reuters) – Japanese banks and pensioners will be first in line to feel the pain if Japan successfully reignites inflation and inflates away its debts.

Which are two very good reasons truly effective central bank action may not happen, and if it does will carry heavy unintended consequences.

Fresh from a landslide victory on Sunday, Shinzo Abe, Japan’s next prime minister, lost no time in hammering home the demands he’s made on the Bank of Japan, saying the electorate had ratified his calls for more stimulus.

Who ate the market volatility?

Dec 13, 2012 22:38 UTC

By James Saft

(Reuters) – For an uncertain world – one with fiscal cliffs, eurozone recession and regime change at the Federal Reserve – it sure is quiet out there.

Volatility in financial markets is now trading more like we are in the pre-crisis world of 2006, rather than one in which most of the crucial questions are left unanswered.

Sometimes called the fear index, the VIX which gauges investor perceptions of how jumpy the S&P500 stock index will be in the coming month, is now trading at around 16, more than 60 percent below its 2011 peak and not too far above its median level for the past century. In fact, if we get through December without a major market upset, 2012 will be the first year in seven without a significant spike in the VIX.

SAFT ON WEALTH: Who ate the market volatility?

Dec 13, 2012 19:58 UTC

Dec 14 (Reuters) – For an uncertain world – one with fiscal
cliffs, eurozone recession and regime change at the Federal
Reserve – it sure is quiet out there.

Volatility in financial markets is now trading more like we
are in the pre-crisis world of 2006, rather than one in which
most of the crucial questions are left unanswered.

Sometimes called the fear index, the VIX which
gauges investor perceptions of how jumpy the S&P500 stock index
will be in the coming month, is now trading at around 16, more
than 60 percent below its 2011 peak and not too far above its
median level for the past century. In fact, if we get through
December without a major market upset, 2012 will be the first
year in seven without a significant spike in the VIX.

AIG “profits” an insult to the concept: James Saft

Dec 12, 2012 18:58 UTC

By James Saft

(Reuters) – To say taxpayers made money from their investment in AIG is to libel the very concept of profit.

Come to think of it, it may well be a gross insult to the idea of investment too.

The Treasury Department announced on Tuesday it would get $7.6 billion from the sale of its remaining government-owned shares in American International Group, taking it to what was widely reported to be a profit of $22.7 billion on the bailout.

The perversity of student debt: James Saft

Dec 11, 2012 05:01 UTC

Dec 11 (Reuters) – U.S. student debt levels are surging but
along with degrees and skills the loans are producing perverse
incentives and unforeseen economic consequences.

Consumers upped their debt by a seasonally adjusted $14.2
billion in October, driven in substantial part by strong growth
in student loans, a market dominated by the government.

U.S. student debt has grown at a nearly 14 percent clip
annually since 2005, hitting $904 billion in the first quarter
of 2012, partly cushioning the impact on the economy of an
overall fall in outstanding debt as people sought to use a
period of slack growth to retool.

The yen gets it in the end: James Saft

Dec 4, 2012 05:03 UTC

By James Saft

(Reuters) – What happens when an over-valued currency meets a political leader seemingly bent on imposing his vision on a battered central bank?

Watch Japan, soon-to-be Prime Minister Shinzo Abe and the yen in 2013 to find out. (Spoiler alert: the currency gets it in the end.)

Abe, whose Liberal Democratic Party is expected to be returned to power by a December 16 election, also is likely to deliver global financial markets about as much volatility as they can handle, as his comments about his plans for the central bank have been frequent, inconsistent and radical.

Dollar and Treasuries to gain on fiscal woes: James Saft

Nov 29, 2012 21:30 UTC

Nov 29 (Reuters) – If U.S. fiscal woes set off a market
downdraft, this time the dollar could actually be a beneficiary.

Negotiations over the “fiscal cliff,” a mix of automatic tax
rises and spending cuts, are ongoing. Though a deal of some sort
will probably be struck, there is a real chance of a
market-toxic outcome.

Stocks, of course, would suffer and Treasuries
rally, even if an inability to strike a credible
deal over the fiscal cliff makes the United States as a borrower
look, well, a bit lame.

The bricks-and-mortar albatross: James Saft

Nov 27, 2012 05:00 UTC

Nov 27 (Reuters) – To understand why the retail sector will
continue to be such an investment minefield consider just two
phrases: Black Friday and Cyber Monday.

The latter, the mock tradition of buying stuff online when
the boss isn’t watching on the Monday after Thanksgiving, is
emblematic of the forces challenging a retail industry much of
which was built for a U.S-centered cars, parking lots and box
store paradigm which makes less and less sense every day.

Black Friday began to be so called in the 1980s because it
marks the kick-off of the holiday shopping season during which
retailers are thought to move from the red ink of annual loss
into the black of profit.

Shadow banking hangover still to come: James Saft

Nov 20, 2012 05:01 UTC

Nov 20 (Reuters) – Like a hangover that starts before you
even go to bed, the fact that the shadow banking system has
expanded since the crisis bodes poorly for what comes in the
morning.

Shadow banking, financial intermediation done in such a way
as to elude regulations imposed on traditional banks, has
actually grown since the onset of the financial crisis in 2007
and stands at $67 trillion worldwide, according to a new
accounting from the Financial Stability Board.

That’s hard to square with assumptions that investors, stung
by losses caused by a run on assets in shadow banking during the
crisis, have learned their lesson, much less that economic
growth is being crimped in part by falling credit and money
creation by shadow lenders.

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