James Saft

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.

In theory this should be very good for riskier assets, as
volatility has a nasty habit of flushing out investors. But in
practice the outlook for 2013 may hinge on whether the forces
suppressing volatility can keep the market placid.

To figure out the likelihood of that, you have to answer a
question: is the low volatility a return to normal, perhaps
supported by changes in the structure of markets, or are markets
being tranquilized by “quantitative easing” by central banks and
low interest rates?

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

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.

The sad necessity of Fed watching: James Saft

Nov 16, 2012 17:05 UTC

Nov 16 (Reuters) – Every investor, sadly, has to be a Fed
watcher given that U.S. asset markets are supported, if not
levitated, by quantitative easing.

Sadly because, and Ben Bernanke himself might agree with
this, we could all probably find more productive ways to spend
our time. Sad, too, because the Federal Reserve’s reach actually
seems to be diminishing amid doubts about how well QE is

Perhaps never before has the market been this dependent on
the Fed and perhaps never before has there been as much doubt
over its eventual success.

Fiscal this, taxes that – earnings the real worry: James Saft

Nov 14, 2012 21:04 UTC

By James Saft

(Reuters) – With earnings data now looking decidedly glum, the market may have more immediate things to fear than rising tax rates and falling government spending.

The S&P 500 is down more than 9 percent from its October peak, and about 4.5 percent since election day, prompting much debate over the impact of the impending fiscal cliff, which may hit the economy, and potentially rising rates of taxes on income, dividend and capital gains taxes.

Albert Edwards, the bearish but often prescient strategist at Societe Generale in London, thinks things are quite a bit more simple than that.

Shrinking Japan asks for more of the same: James Saft

Nov 13, 2012 05:00 UTC

Nov 13 (Reuters) – Japan is shrinking again and its
government thinks the answer lies in more of the same policy the
Bank of Japan has been unsuccessfully implementing for 17 years.

Japan’s economy contracted by 0.9 percent in the third
quarter, data showed on Monday, reversing earlier quarters of
growth and taking the country into a nosedive equating to a 3.5
percent annual decline.

Inevitably, this has economists and policy-makers fretting
over whether Japan is sinking into a recession, technically
defined as two successive quarters of economic contraction.